University van Amsterdam
Faculty of Social and Behavioural Sciences MSc Political Science
Political Science: International Relations
China’s geopolitical advance through the angle of its energy supply security. A case study of the Sino-Brazilian partnership.
Master Thesis by Iliy Naidenoff - (11109343)
Keywords:
China, Brazil, energy, geopolitics, national oil companies
Research Project:
The Political Economy of Energy
Supervisor: Prof. Dr. M. Amineh Second reader: Prof. Dr. Kurt Radtke
Table of Contents
Abstract 4
Acknowledgement 5
Maps of the Selected Countries 6
List of Figures and Tables 8
List of Abbreviations 9
Chapter 1. Research Design 11
1.1 Introduction 11
1.1.2 Objectives 12
1.1.3 Research Question 13
1.1.4 Research Delineation 13
1.2 Literature review 14
1.2.1 Chinese Energy Security 14
1.2.2 China Brazil Relations 16
1.2.3 China Brazil Energy Geopolitics 17
1.2.4 Auxiliary Quantitative Sources 18
1.3 Theory and Concepts 21
1.3.1 Energy Scarcity Model and Concepts 21
1.3.2 Critical Geopolitics Theory 24
1.4 Hypotheses 26
1.5 Operationalisation and Methodology 28
1.6 Work Structure 30
Chapter 2. China’s Energy Condition and Security 31
2.1 Introduction 31
2.2 China’s Energy Predicament 32
2.3 China’s Ruling Elite 35
2.3.1 State Council and National People’s Congress 36
2.3.2 National Development and Reform Commission (NDRC) 37
2.3.3 National Energy Commission and Administration (NEC & NEA) 37 2.3.4 State-owned Assets Supervision and Administration Commission 39
2.4 China’s Energy Policy and Challenges 40
2.5 Chinese NOCs 42
2.6 Conclusion 46
Chapter 3. Sino-Brazilian Relations 47
3.1 Introduction 47
3.2 Sino-Brazilian Diplomatic Relations 48
3
3.2.2 China-Brazil High-Level Coordination and Cooperation Committee (COSBAN) 50
3.2.3 Bilateral Agreements: Joint Action Plan 2010-2014 51
3.2.4 Bilateral Agreements: Joint Action Plan 2015-2021 52
3.3 Sino-Brazilian Economic Relations 53
3.3.1 Trade 54
3.3.2 Oil Trade and Pre-Salt Reserves 55
3.3.3 Low Oil Prices 58
3.3.4 Biofuel Trade 60
3.3.5 Energy Sector Investments 60
3.3.6 Finance 63
3.5 Conclusion 68
Chapter 4. Potential Geopolitical Implications and Challenges of the Sino-Brazilian Energy
Relationship 69
4.1 Introduction 69
4.2 Sino-Brazilian Relationship Development 70
4.2.1 Chinese Engagement Tactics 70
4.2.2 Trade Perceptions 72
4.2.3 Investment Perceptions 74
4.2.4 China’s Economic Slowdown and Brazil’s Political Turbulence 75 4.3 Geopolitical Reflection of the Sino-Brazilian Partnership? 77 4.3.1 United States Disengagement from South America: Consequences 78 4.3.2 Geopolitical Implications of the Sino-Brazilian Military Cooperation 79 4.3.3 Institutional and Infrastructural Conditions of China’s Involvement in Brazil and South
America 82
4.3.4 Conclusion 85
Chapter 5. Conclusion 87
5.1 Overview 87
5.2 Hypothesis Revisited 88
5.3 Findings and Recommendation 91
Abstract
This thesis intends to examine China’s energy supply security from Brazil and the possible geopolitical implications for the region and the United States interests. Due to the growing pressures of resources scarcity, environmental pollution and the need to preserve economic growth, the People’s Republic is faced with an opportunity to connect its economy with those of resource-rich countries as a way to acquire access to their abundant reserves. Recent deep-sea oil discoveries have put Brazil on the map of world petroleum exporting states and have enticed China’s quest for supply security. By increasing bilateral trade, investment, and finance, China has been able to take a more prominent position in Brazil’s economic future and energy sector development. Furthermore, consciously or not, the PRC is making a claim for more geopolitical influence in the region by offering rising economies such as Brazil a multilateral alternative to the current global economic and political order. Finally, in order to better comprehend the geopolitical scope of China’s multi-faceted involvement in Brazil, the state behaviour and strategic actions of the United States will also be examined in the context of energy governance and formal military presence.
Acknowledgement
First and foremost, I would like to thank Professor M. P. Amineh for his zeal in delivering an invaluable seminar experience that has without a doubt enhanced my understanding of today’s major political and economic forces. I would also like to thank my colleagues and loved ones for their contribution and support, that helped guide me in the process of finishing my first master thesis. Special thanks go to Prof. Dr. Barbara Hogenboom, Simon Spornberger, Elena Radeva and Ludmila Manova.
Maps of the Selected Countries
Map one: China
7 Map two: Brazil
List of Figures and Tables
Figure 1: China's Energy Consumption by Fuel Type, 2012 33
Figure 2: China's New Energy Administration 39
Figure 3: Selected Chinese Oil & Gas Investments Overseas by Country and Value (1993-2013) 44
Figure 4: Chinese NOCs Administrative Control 45
Figure 5: Chinese imports from Brazil (2014) 55
Figure 6: Pre-salt Oil Drilling 57
Figure 7: Brazil offshore pre-salt fields 57
Figure 8: Oil and Gas Production in Brazil by Company 63
Figure 9: Chinese lending to Latin America (2005-2013) 64
List of Abbreviations
CCP Chinese Communist Party
COSBAN China-Brazil High-Level Coordination and
Cooperation Committee
CEPAL Comisión Económica para América Latina y el Caribe
ECLAC Economic Commission for Latin America and the
Caribbean
IPA Investment Promotion Agency
NDRC National Development and Reform Commission
NEA National Energy Administration
NEC National Energy Commission
NOC National Oil Company
NPC National People’s Congress
PRC People’s Republic of China
PSC Politburo Standing Committee
LAC Latin America and the Caribbean
SASAC State-owned Assets Supervision and Administration Commission
SOE State-Owned Enterprises
UNCTAD United Nations Conference on Trade and
Development
UNDP United Nations Development Programme
“Our doubts are traitors,
and make us lose the good we oft might win, by fearing to attempt.”
Chapter 1. Research Design
1.1 Introduction
With the introduction of market-oriented principles in the late 1970s, China has managed to maintain an exponential growth curb under which its economy has flourished. Fuelling this rise has been the use of non-renewable fossil fuels. In today’s global market, hydrocarbons continue to operate as the driving fuel type for any manufacturing state or heavy industrialised giant. Due to its rapid industrialisation pace, the People’s Republic has become the world largest consumer of energy and second largest consumer of crude oil1. This in turn, however, has resulted in an energy dependency state in which imports from resource-rich countries are maintaining the energy consumption habits of both industry and citizens alike.
Primary resources therefore, become not only a cornerstone for economists and companies to balance their strategies to, but a pivotal interest point for politicians and governments to form policies around. Scenario works on the outlook of world energy consumption, production and competition reinforce the sense of urgency by dictating that fossil fuel supplies will continue to grow in the next 30 years, leaving primary sources to dictate future transport, manufacturing and power generation development2.
China is one of the most glaring examples of a state affected by such an environmentally challenging prognosis. Its decision to look towards resource-rich countries and regions as a diversification panacea for its rising energy needs could be considered as not only a logical step but a necessary one as well.
Establishing a strong political dialogue with exporting states based on mutual respect and mutual gains is only a prerequisite diplomatic groundwork needed for further cooperation on economic and even military levels. China is consciously aware of these requirements and this is why in the last twenty years the Communist state has opted to connect its economy to that of regions like South America, the Middle East and the Caspian Sea in order to guarantee itself access to their ample reserves.
1 U.S. Energy Information (eIA), ‘China: International energy data and analysis’, Overview, Last
Updated: May 14, 2015, http://www.eia.gov/beta/international/analysis.cfm?iso=CHN, Last visited on: May 24, 2016
2 World Energy Council, ‘World Energy Scenarios: Composing energy futures to 2050’, Project Partner
Recently, with substantial oil discoveries at hand (namely in Venezuela as well as in Brazil), South America has contributed to China’s growing interest in the region, by offering two strategic opportunities for development and structural change: energy-oriented economic incentive for investments and trade and a secondary multi-faceted geopolitical agenda. Although not a pure equal to Venezuelan oil reserves, Brazil still stands as the epitome of a fast developing country with energy, trade and geopolitical value all concentrated in the biggest Latin American state by size of population, size of national economy, size of regional FDIs and overall political pull. Sino-Brazilian relations therefore adequately represent a dynamic partnership of two countries from the developing South, which strive to become bigger and more important players in the global power architecture of today. The context of this relationship covers an array of economic, political, diplomatic, cultural, military and global factors, all linked with each other to form a comprehensive modern form of cooperation with Chinese characteristics. With the help of International Political Economy factors, The People’s Republic has firmly implanted itself to become an important force in the future of Brazil.
Albeit being second in terms of strategic importance to the region and its inhabitant states, Chinese actions intentional or otherwise challenge the Post-Cold War US hegemonic power position. Be it through involvement of Chinese National Oil Companies investments in Brazil’s deep-water reserves, trade, continentally crossing infrastructural projects, financial support and growing military cooperation, Sino-Brazilian relations may extend from the context of energy governance to new realms of global order and power distribution.
1.1.2 Objectives
This research’s primary focus is China’s energy supply security from Brazil. The following proposal and subsequent elements centre around three main objectives. First objective deals with deciphering the logic behind China’s energy policy and its supply security strategy. The second objective aims to determine the tools used in the process of connecting China’s energy supply security to Brazil. The third and final objective intends to assess the geopolitical and economic implications of China’s energy
13 involvement in Brazil and the challenges it poses to the current regional power structure in South America.
1.1.3 Research Question
Based on the information discussed above, this master thesis will tackle the following research question:
What is the nature of China’s relationship with Brazil in the context of Chinese energy supply security and what geopolitical challenges does the Sino-Brazilian partnership present to the current global order?
Sub-questions will also be provided. They will be of a general kind and thus may be partnered with smaller composite ones as to achieve a comprehensive and detailed understanding of the main research problematic. The general sub-questions are as follows:
1. What is the logic behind China’s energy policy and its supply security strategy and what role does Chinese NOCs play in the process?
2. What is the nature of China’s relationship with Brazil?
3. What are the main tools used in the process of connecting China’s energy supply security to Brazil?
4. What geopolitical and economic implications does China’s energy and trade related involvement in Brazil have to the partnership itself and to the current global order?
1.1.4 Research Delineation
This thesis will discuss Sino-Brazilian energy supply security and trade partnership and its geopolitical implications from the years 2000 to 2016. Minor references to earlier periods between 1990 and 2000 will also be included.
1.2 Literature review
The central topic being examined in this research proposal is China’s strategic involvement in Brazil and the geopolitical and economic implications of this partnership in the context of Chinese energy supply security, geopolitics and potential impediments to the future of the partnership. By focusing on China’s energy supply security and its strategic involvement in resource-rich countries (e.g. Latin America, Middle East), this thesis will attempt to provide a clear picture of the larger ambition of the People’s Republic of China to assert itself as a dominant actor outside the Atlantic and its traditional East-Asian zone of influence.
1.2.1 Chinese Energy Security
With economic reforms at hand in the late 1980s and 1990s, China began its journey from a planned economy to a market-oriented one. Due to this partial liberalisation, industrial development was able to take off and achieve historically high levels of economic growth. Nevertheless, the negative by-product of industrial development reinforced the importance of energy security for the future of the authoritarian state. This thesis intends to adopt The United Nations Development Programme (UNDP) formulation of the term energy security, according to which: “Energy security is a term that applies to the availability of energy at all times in various forms, in sufficient quantities, and at affordable prices, without unacceptable or irreversible impact on the environment. These conditions must prevail over the long term if energy is to contribute to sustainable development”3. More often than not, Daniel Yergin’s definition of energy security is the preferred citing source in academic writings4. Both UNDP and Yergin share a common view when acknowledging the importance of market performance whenever global energy availability is affected.
Changes in availability, however, may occur due to internal or external factors, which force countries to act in a particular way. Amineh and Houweling’s scarcity model helps elucidate the main causes and actors involved in the progressive decrease of
3 UNDP, ‘World Energy Assessment: Overview 2004 Update’, United Nations Development Programme,
Part III: Energy and Major Global Issues, p. 42, (2004)
4 Yergin, Daniel, ‘Ensuring Energy Security’, Foreign Affairs, Volume 85, No. 2, p. 71, (March/April
15 global oil reserves while also engaging in deciphering the consequences of China’s economic rise on its energy supply. Conceptually, Amineh and Houweling’s scarcity model proves to be a sufficient indicator of world leaders’ behaviour on the basis of evaluating their energy consumption and supply habits. Their model provides three types of conceptual scarcity each triggered by a different force in the global market - supply induced scarcity (dwindling of the stock), demand-induced scarcity (due to increased consumption) and structural scarcity (based on actors and regulating institutions restricting access by driving up the price). In this particular case, China appears to touch upon the first two kinds.
Joseph Y. S. Cheng builds on the persistent threat of energy security and global resource competition and points to an ‘oil diplomacy’ foreign approach that reflects China’s policy orientation towards resource-rich states and regions5. Leung’s perception of China’s energy security measures pays attention to the reliability of supply and dismisses reasonable energy pricing in return for low price volatility similar in mind to the work of Alhajii6.
A recurring component relevant to this work is the concentration and distribution of power in the Communist state. Barry Naughton talks about the top-down control, state led institutions and state-controlled companies experience in the PRC7. In his work he considers the Chinese transitional period in which privatisation progressively accumulated grounds to have stopped. In its place, large central government-controlled firms have formed and began to deal with relevant points of interest. Knowledge about the internal political system is an important facet of the whole picture. In their US Congressional reports, Susan V. Lawrence and Michael F. Martin cover China’s political structure and chain of command, emphasising an exclusive governmental structure guided by socialist’ norms and values and operated by an extremely limited number of state officials. From such reports, additional graphics and accompanying
5 Cheng, Joseph, Y., S., 'A Chinese View of China's Energy Security', Journal of Contemporary China,
17 (55), p. 297, (May 2008)
6 Leung, Guy C. K., ‘China's energy security: Perception and reality’, Energy Policy, 39, (Available
online: January 7, 2011) and Alhajji, A. F., ‘What is energy security? Definitions and Concepts (Part 3/5)’, Middle East Economic Survey (MEES), Vol. L, No. 45, (November 5, 2007)
7 Naughton, Barry, ‘Top-Down Control: SASAC and the Persistence of State Ownership in China’, Paper
presented at the conference on “China and the World Economy” Leverhulme Centre for Research on Globalisation and Economic Policy (GEP), University of Nottingham, (June 23, 2006)
literature it becomes clear that The Communist Party’s Politburo Standing Committee (PSC) embodies the principle state apparatus, responsible for dealing with all issues of national security.
1.2.2 China Brazil Relations
Sino-Brazilian relations have been the subject of scholarly interest and the focus of reports from private organisations, institutes, think tanks and non-governmental organisations since the establishment of the Strategic Partnership in 1993. Barbara Hogenboom and Alex E. Fernández Jilberto are among the most prominent examples of IR scholars focused on Latin American studies8. Their work on South-South Cooperation will provide substantial insight from which this thesis will later build upon. Henrique Altemani de Oliveira (who co-authors Hogenboom and Jilberto’s book) discusses the development of the Sino-Brazilian partnership since Brazil’s international insertion strategy and China’s diversification and Going-Out policy implementation, questioning the degrees of reciprocity of the bilateral relations in a chronological analysis9.
Bilal also discusses the rise of South-South relations and questions the extent to which South-South cooperation appears more attractive than the traditional development model used by the North10. Similar in views are John Whalley and Dana Medianu, who document the deepening of economic relations between Brazil and China as leaders of the global South. Data gathered by them points to a strong increase in bilateral trade between the two and a decline of Brazil-US trade relations. What Whalley and Medianu do not discuss in detail is the possibility of China shaping Brazilian economy towards a resource-exporting model. Competition for manufactured goods, labour-intensive commodities and even high-technology products pose a silent threat to the Strategic Partnership. Jenkins and Barbosa conduct a comparative market share analysis using
8 Jilberto, Alex E. Fernández and Hogenboom Barbara, Latin America Facing China: South-South
Relations beyond the Washington Consensus, CEDLA Latin American Studies 98, Oxford and New
York: Berghahn Books, Chapter 2, p. 33, (2010)
9 de Oliveira, H. A. (co-author), Jilberto, Alex E. Fernández and Hogenboom Barbara, Latin America
Facing China: South-South Relations beyond the Washington Consensus, Chapter 2: Brazil and China:
From South-South Cooperation to Competition, CEDLA Latin American Studies 98, Oxford and New York: Berghahn Books, p. 33, (2010)
10 Bilal, San, ‘The Rise of South-South Relations: Development Partnerships Reconsidered’, European
17 three different periods of time (1996, 2001, 2004 and 2009) in order to assess the nature and threat level of Chinese competition11. Data gathered using an extension of Batista’s
Constant-Market-Share analysis12 shows that albeit not having a major negative impact
on manufacturing, production or employment, Chinese goods do affect Brazilian export markets causing the country to lose customers while hindering economic progress. The specialised literature and their respective academic authors discussed in this sub-section provide information for the current state of Chinese involvement with Latin America and in particular with Brazil. Moreover, these works also relate a broader geopolitical meaning that will be the subject of analysis in the subsequent chapter.
1.2.3 China Brazil Energy Geopolitics
The debate surrounding the geopolitical challenges and implications of China’s advance into South America in the context of energy trade and governance is somewhat dependent on the host country. Independent examples which are detached from the continent risk being unrepresentative of the whole either because of their size and influence or because of their various levels of cooperation with China. Carlos Pereira and João Augusto de Castro Neves see Brazil as the embodiment of South-South cooperation efforts with China in both inter-state and multi-state levels (BRICS, WTO, G20)13. The importance of Brazil as a South American leader is reiterated in many think
tank reports and documents. Susanne Gratius and Miriam Gomes Saraiva discuss the dual identity of Brazil as a Latin American country leader on the one hand and a BRICS member on the other14. They research Brazil’s support for regionalism as a nation-binding instrument and as a tool to soft-balance American presence in the region. Similarly, China’s adherence to multilateralism draws parallels with Brazil’s support for more South inclusion into the Western-dominated financial structures and more responsibilities equal to the size and development of rising economies. In the state
11 Strauss, Julia C. and Armony, Ariel C., From the Great Wall to the New World: Volume 11: China and
Latin America in the 21st Century (The China Quarterly Special Issues), Chapter 4: Fear of
Manufacturing? China and the Future of Industry in Brazil and Latin America, (authors: Rhys Jenkins and Alexandre de Freitas Barbosa), p. 75, (May 24, 2012)
12 Batista, J. Chami, ‘Competition Between Brazil and Other Exporting Countries in the US Import
Market: A New Extension of Constant-Market-Share Analysis’, Applied Economics, No. 40, pp. 2477-2487, (2008)
13 Pereira, Carlos & de Castro Neves, J. A., ‘Brazil and China: South-South Partnership or North-South
Competition?’, Brookings Institute, Policy Paper Number 26, (March 2011)
14 Gratius, Susanne and Saraiva, Miriam Gomes, ‘Continental Regionalism: Brazil’s Prominent Role In
triangle China-Brazil-US, José-Augusto Guilhon-Albuquerque sees the United States as a superpower whose declining ability to assert its undisputed global primacy gives rise to foreign exploitation15. In such a context, China has been able to gain momentum in
South America, during a period in which the US disengaged from the region. Lack of credibility for the latter translates into advantages for the former. Gradual changes in traditional US zones of influence such as LAC and Africa also begin to question the domain of energy governance. Christian Downie sees BRICS countries as the main contender states for reform of the global energy governance architecture16, either because of their global political ambitions or because of the growing pressures their rapidly transforming economies apply to global energy market. Although Downie stipulates that the BRICS lack the leadership consensus and willingness to proceed with such reforms, members such as China (and to a minor extern Brazil) pose a potential challenge to US dominance in energy supply and regional energy production. Stefania Paladini showcases how China’s development model offers a multilateral perspective to South American countries, which are tired of the traditional Western interests17. What could cause grounds for concern is the development of the countries mutual perception of each other. Brazil views China as a diversification tactic that helps balance against US economic and political dependence, whereas China view Brazil as a diversification tactic to its energy supply and trade flows regardless of any potential detriments to the other side’s economy. Therefore, systemic research is required in order to assess accurately the nature and health of the Sino-Brazilian relations specifically in the dynamic framework of energy governance.
1.2.4 Auxiliary Quantitative Sources
Financial institutions and bureaus databases, energy information administrations and major multinational oil companies’ statistical reviews contribute to numerically justifying the applied concepts and approaches. As oil availability is of key importance to any energy oriented analysis, knowledge about world resource distribution,
15 Guilhon-Albuquerque, José-Augusto, ’Brazil, China, US: a triangular relation? / Brasil, China, EUA:
uma relação triangular?’, Revista Brasileira de Política Internacional, Vol. 57, (2014)
16 Downie, Christian, ‘Global energy governance: do the BRICs have the energy to drive reform?’,
International Affairs 91: 4, p. 799–812, (2015)
17 Paladini, Stefania, ‘A View from the Isthmus: China’s Strategic Interests in Latin America between
19 consumption and production is a subject of both great interest and great uncertainty. The British Petroleum (BP) Statistical Review of World Energy from 2015 can be considered as the go-to-reference paper when it comes to consulting the possession and production of oil, gas, coal and renewables in the world today. BP’s Statistical Review is what many of the cited sources use for final energy reference including: The Central Bank of Brazil (Banco Central do Brazil), Agência Nacional Do Petróleo, Gás Natural E Biocombustíveis (ANP) and the U.S. Energy Information Administration (EIA).
As ANP and Banco Central do Brazil provide a detailed breakdown of the energy sector in Brazil, the World Bank Database and the National Bureau of Statistics of China Yearbook offer indispensable insight into China’s sectoral consumption, production, balance of payments and GDP growth. On the other hand, The U.S. Energy Information Administration (EIA) analysis on both China and Brazil provide a structured sectoral analysis of energy topics. EIA reports consolidate information on all facets of energy related economic factors and criteria and are always up to date in terms of data, statistics and figure provision. The 2015 report on China and its sections on total primary energy consumption, coal and petroleum use indicate a direct correlation between the increased use of coal (and oil) and the rapid industrialisation of the country.
Policy documents and plans are vital components of any form of scientific examination or analysis. From a domestic institutional standpoint, China’s energy policy and attitude towards energy supply is most visible in two types of national policy documents - China’s Five Year Plan (FYP) and China’s Energy Policy. In the 12th FYP and China’s
2012 Energy Policy, energy security takes a very important place in terms of economic importance related to national security. As the 12th FYP covers the period from 2011 to 2015, the subsequent 13th FYP covers the years from 2016 to 2020, more or less expanding on already existing policies and reforms. However, despite not being officially ratified during the preparation for this paper, initial information points that the 13th FYP focus points gravitate around innovation, green development and more international cooperation18.
18 APCO Worldwide, ‘The 13th Five-Year Plan: Xi Jinping Reiterates his Vision for China’, (2016),
Available at: http://www.apcoworldwide.com/docs/default-source/default-document-library/Thought-Leadership/13-five-year-plan-think-piece.pdf?sfvrsn=2
As this thesis will employ the use of statistical documents it is of paramount importance that they are directly related to the subject and to the specific country under question. Brazilian state controlled company Petróleo Brasileiro S.A. (Petrobras) that holds one of the most if not the most important positions in upstream, midstream, and downstream activities. In coordination with Petrobras there is also the Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP) - a government agency charged with regulation and monitoring of the oil sector as well as competence of issuing exploration and production licenses. Both Petrobras and ANP provide statistical yearbooks, reports and adjustments on the status of proven reserves, business and management plans and other noteworthy activities. Ergo consolidating knowledge and information from these types of documents must be considered as not only vital but as a quantitative tool in terms of methodology.
National oil companies (NOCs) also play a significant role in this research and it is only natural that information about them would be deemed necessary. Chinese state owned enterprises (SOEs) include Sinopec Group and its affiliate Repsol Sinopec Brazil and Sinochem Petróleo Brazil. Statistical yearbooks and reports from these two actors illustrate the level of involvement of the Chinese led NOCs in Brazil.
This research’s contribution to the underlying issue will be its analytical value and use of Brazil as a host country. Literature related to energy supply security between China and South American countries usually extends to states economic relations and each actor’s respective gains and losses. What this research will do is to question and comprehend the larger geopolitical effect of such partnerships as well as the relative gains of such partnerships. The choice of Brazil as host country is more than appropriate to any attempt made by a major contender state in challenging the existing global order by imposing itself in South America. Intentional or not, China’s energy supply security policy in resource-rich countries like Brazil points to state ambitions larger than mere economic gains. Such considerations of geopolitical and strategic character and partnership assessment are what will be considered as new additions to the debate of energy supply security and global order.
From the preliminary reading of documents, reports, journals, statistics, outlooks, yearbooks and other sources of information, an overall conclusion can be reached that
21 the goal of this thesis is within the limits of objectivity and can provide for a detailed and comprehensive answer to the proposed research question.
1.3 Theory and Concepts
This section of the thesis will evaluate concepts and theories beneficial to a better understanding of this research’s problematic and assemble them into a comprehensive framework. The research thesis will mainly examine Chinese energy supply security from Brazil and its potential geopolitical implications for Latin America and the United States historic presence in the region. Structure wise, this section will include conceptual parts related to the global availability of resources and China’s rationale behind its supply security policy and theoretical dimensions that cover globalisation and IPE factors in a new form of geopolitical medium.
1.3.1 Energy Scarcity Model and Concepts
In support of its rapid industrialisation period post 1993, China gave way to an unprecedented surge of foreign energy imports and energy consumption increases. In return, the country currently faces profound challenges of environmental and supply security kinds. The latter is what is the focus of this research, therefore, a working definition must be at place at an early stage. The United Nations Development Programme description of the term energy security is what this thesis will use as its default understanding, appropriating specific details based on each countries energy policies. According to the UNDP:
"Energy security is a term that applies to the availability of energy at all times in various forms, in sufficient quantities, and at affordable prices, without unacceptable or irreversible impact on the environment. These conditions must prevail over the long term if energy is to contribute to sustainable development”19.
In order to comprehend the exact degree of urgency and relevance to the PRC’s agenda, one needs to understand the logic behind the state’s supply security policies and plans.
19 UNDP, 'World Energy Assessment: Overview 2004 Update', United Nations Development Programme,
Normally such documents relate a larger issue of resource availability to the specific context and circumstances of the importer state. In this particular case China’s energy supplies are threatened by long-term security of imports, rising household, transport and manufacturing consumption, territorial instabilities and even government changes. Here, Amineh and Houweling’s work on resource scarcity contributes greatly to the issue at hand20.
The resource scarcity model takes into account three key economic forces demand, supply and institutional structures (financial or otherwise) and from them provides three distinct categories of scarcity from which state behaviour can be understood and even predicted21. The three forms are: demand-induced scarcity; supply-induced scarcity and structural scarcity. Demand-induced scarcity is caused by three factors: population growth, rising per capita income and technological change. All three, however, precondition the selection of a specific type of country the overall majority of which include developing nations such as China and India. Amineh and Guang’s concept of sequential industrialisation proves beneficial here as it points to the direction rising economies follow in order to sustain their economic development22. The concept refers to “the sequence in time in which some strong state-societies succeeded in the transition to industrial-based politics, society and economy”23. Considering the authoritarian form of state control, the Chinese government exercises over its society, economy and political sphere, a sequential capitalist industrialisation can only be possible at a pace and place determined by its central authority24. If the pace is conditioned by the
increasing globalisation and the Chinese state’s political push, then the place is the post-Cold war global system. In this process, China provides an alternative to the current order, thus constituting itself as a contender state, external to the Pax Americana25. By doing so, the communist state becomes more open to lateral pressures, which involve
20 Amineh, M. P. and Houweling, H., 'Global Energy Security and Its Geopolitical Impediments - The
Case of the Caspian Region’, Perspectives on Global Development and Technology No. 6, BRILL, p. 365, (2007)
21 Ibid., p. 374
22 Amineh, M. P., and Guang, Yang, 'Introduction: Geopolitics of Transnationalization of Chinese
National Oil Companies’, Perspectives on Global Development and Technology No. 13, BRILL, Introduction, p. 495, (2014)
23 Ibid., p. 501
24 Nolan, Peter, "China and the Global Economy: National Champions, Industrial Policy and the Big
Business Revolution", Palgrave Macmillan UK, p. 199-200, (2001)
25 Amineh, M. P. (ed.), “State, Society and International Relations in Asia”, Amsterdam University Press,
23 the build-up of pressure by socio-economic forces released by market actors such as industry, corporations, domestic consumers and political leaders that project state power beyond state borders in order to acquire access to deposits of minerals, metals or sales abroad26. Such pressures force the state to cater to a specific set of needs covering the spectrum of economic, geopolitical and social points. Going back to the conditions of a demand-induced scarcity, the Chinese-state example provides ample proof of all three prerequisites: rising per capita income, population growth and technological change respectively shown through the effects of its industrialisation process. Structurally, Chapter 2 will be tasked with the provision of proof for all three categories; therefore, any additional information here will only dilute the focus of the chapter later on.
As mentioned earlier, the second type of scarcity is a supply-induced one. Although it interacts with the opposite force of resource demand, it focuses more on price volatility provoked by the anticipatory character of market actors’ awareness of the dwindling of stocks27. Typically, outcome scenarios in which prices increase due to anticipation
result in military interventions or territorial conquest from energy hungry states. The third and final type is structural scarcity, which represents a supply-induced form of scarcity originating from the conscious and deliberate actions of major powers, non-state actors (NOCs) or a conglomerate of producing non-states such as for example the Organization of Petroleum Exporting Countries (OPEC)28. Amineh and Houweling thus emphasize that the aim of developed states’ “energy foreign policy” is to assert a geopolitical power projection onto resource-rich regions and countries29. Power
projection in these terms is defined as “creating routes abroad to access stocks of minerals abroad and protecting them, either by force or by peaceful cooperation.”30 This line of reasoning will be extended to China’s soft power projection onto Brazil and the Latin American region in Chapter 3 and Chapter 4 of this thesis.
26 Ibid., p. 509
27 Amineh, M. P. and Houweling, H., 'Global Energy Security and Its Geopolitical Impediments - The
Case of the Caspian Region’, Perspectives on Global Development and Technology No. 6, BRILL, p. 375, (2007)
28 Ibid., p. 375 29 Ibid., p. 376
30 Amineh, M. P., and Guang, Yang, 'Introduction: Geopolitics of Transnationalization of Chinese
National Oil Companies’, Perspectives on Global Development and Technology No. 13, BRILL, [d] Lateral Pressure and Power Projection, p. 510, (2014)
1.3.2 Critical Geopolitics Theory
Since the focus of this research accords significant importance to market forces and market actors that shape and influence state’s policy, it is only logical that the proposed theoretical framework would incorporate all of these elements in the context of international relations and energy politics. The most suitable theory, in this case, is critical geopolitics, as it follows an investigative pattern of thinking, which deconstructs existing practices and discourses by following critical theory’s frame of logic.
According to Kelly, contemporary geopolitics has evolved into several categories, that include classical or traditional geopolitics, the power politics or Cold War geopolitics, and the critical versions, which this thesis will favour in its analysis31. Geopolitics as a general term connects geographical variables to states foreign policy, traditional geopolitics or classical geopolitics, however, inserts a state ‘power-rivalry’ as the dominant IR context in which geopolitics helps inform foreign policy32. One of the most prominent supporters of classical geopolitical thought Halford J. Mackinder strongly emphasised the importance of state contest for land and sea as a direct translation to power gains on a global scale in international relations33. In this way, the classical approach stipulates the use of more empirical and objective methodologies34, thus having more in common with realism than any other theory. Realism follows a myopic understanding of nation-states behaviour in which only state actors can truly balance against one another on the arena of international affairs. The lack of consideration for market forces and non-state actors such as NOCs is what excludes this Cold War approach from serving as a probable frame for this topic. Cold War geopolitics (power politics) on the other hand, operates in a context where the common denominator among power states and hegemons is the presence of strong ideologies. Karl Haushofer’s work on geopolitics provided the Nazis with a framework for their propaganda policies during World War II, stigmatising the term for a time, until Henri Kissinger reintroduced it, in the ideologically charged period of the Cold War35. Finally,
31 Kelly, P., ‘A Critique of Critical Geopolitics’, Geopolitics, 11(1), p. 26, (2006)
32 Amineh, M. P., ‘Globalisation, Geopolitics and Energy Security in Central Eurasia and the Caspian
Region’, The Hague: Clingendael International Energy Programme (CIEP), Rethinking Geopolitics in the
Age of Globalisation, (2003)
33 Mackinder, H. J., Democratic Ideals and Reality: A Study in the Politics of Reconstruction, London:
Constable, (1919)
34 Kelly, P., ‘A Critique of Critical Geopolitics’, Geopolitics, 11(1), p. 27, (2006)
25 the third variety of geopolitics finds its roots in post-modernist and specifically critical theory scholars from the Frankfurter Schule (Frankfurt School) school of social theory and philosophy36. In the same critical frame, John Agnew, Gearóid Ó Tuathail, and
Simon Dalby pushed forward a neo-geopolitical approach, combining traditional geopolitics with the global political economy and its ongoing geo-economic discourses37. According to Cox, realism and liberalism fall under the category of “problem-solving theories”as they take the world as it is and make use of social and power relationships and their respective institutions to deal with occurring issues38. Cox’s work on critical theory questions the prevailing world order and its emergence by trying to understand each process of change in both social and political complexes without taking institutions of social and power relations for granted 39. Furthermore, this critical approach questions the state-centric nature of realism and liberalism and accords particular attention to the use of visual images such as maps, the language related to specific political rhetoric, and political performances of an economic or military kind in order to inform states foreign policy40.
For Amineh, neo-geopolitics or critical geopolitics rejects state-centric reasoning by arguing in favour of a global space divided by national and transnational governmental and non-governmental institutions and organisations41. What Amineh uses as the main driver for rethinking geopolitics is the integrational force of economic globalisation, specifically its three main dimensions: global trade; global production and investment,
36 Kelly, P., ‘A Critique of Critical Geopolitics’, Geopolitics, 11(1), p. 27, (2006)
37 See Agnew, J. & Corbridge, S., “Mastering Space: Hegemony, Territory and International Political
Economy”, London and New York: Routledge, p. 19, (1995); Agnew, J., Geopolitics: Re-visioning World Politics, London: Routledge, (1998); Ó Tuathail, G. & Agnew, J., ‘Geopolitics and Discourse: Practical
Geopolitical Reasoning in American Foreign Policy,’ Political Geography Quarterly No. 11, pp. 155-175, (1992); Ó Tuathail, G., & Dalby, S., Rethinking Geopolitics, London: Routledge, (1998); found in Amineh, M. P., ‘Globalisation, Geopolitics and Energy Security in Central Eurasia and the Caspian
Region’, The Hague: Clingendael International Energy Programme (CIEP), Rethinking Geopolitics in the
Age of Globalisation, p. 20, (2003)
38 Cox, W. R., ‘Social Forces, States and World Orders: Beyond International Relations Theory’,
Millennium: Journal of International Studies 10 (2), p. 128, (1981)
39 Ibid., p. 129
40 Agnew, J., ‘Disputing the Nature of the International in Political Geography. The Hettner Lecture in
Human Geography’, Geographische Zeitschrift, No. 89, 1:1–16, (2001)
41 Amineh, M. P., ‘Globalisation, Geopolitics and Energy Security in Central Eurasia and the Caspian
Region’, The Hague: Clingendael International Energy Programme (CIEP), Rethinking Geopolitics in the
Age of Globalisation, p. 20-21, (2003); see also Agnew, J. & Corbridge, S., “Mastering Space:
Hegemony, Territory and International Political Economy”, London and New York: Routledge, p. 4-5,
and global finance42. It is through the application of these three elements that the Sino-Brazilian partnership can best be viewed from a critical standpoint in which IPE factors have just as much importance as state power projections. As mentioned before, in the process of guaranteeing energy security, national oil companies reflect the interests of the Chinese government by investing in overseas projects with resource-rich countries. Such forms of expansion seek primarily the preservation of domestic economic stability by assuring a steady flow of supplies. Therefore, Chinese foreign policy combines political and economic requirements, lateral as well as resource scarcity pressures (as described in the previous sub-section) as shaping factors of its overseas behaviour.
Overall, China’s foreign policy approach in the field of IR involves concentrated soft power tactics through NOC investments in interest sectors abroad, while also maintaining strong trade and financial ties with resource-rich countries of similar stages of development. At the international level, state-made institutions typically reflect the global power structures of the advanced West and at the current post-hegemonic period, rising economies contend the existing global system, by reinforcing their own multilateral perspective of the world43. Brazil, in this case, embodies a country whose geopolitical value and geo-economic opportunities help shape Chinese policy into an expansionistic model aimed at preserving economic growth through IPE-based cooperation. Moreover, by detaching themselves from the ideas of a unilateral world order, China and Brazil consequently question the monopoly of major powers and push forward a multilateral agenda in which cooperation trumps confrontation.
1.4 Hypotheses
On the basis of the above illustrated literature review and theoretical framework, this section will offer several hypotheses to the proposed research question: What is the nature of China’s relationship with Brazil in the context of Chinese energy supply security and what geopolitical challenges does the Sino-Brazilian partnership present to the current global order? Each hypothesis modifies the subsequent one, delivering
42 Amineh, M. P., ‘Globalisation, Geopolitics and Energy Security in Central Eurasia and the Caspian
Region’, The Hague: Clingendael International Energy Programme (CIEP), Rethinking Geopolitics in the
Age of Globalisation, p. 12, (2003)
43 Amineh, M. P., and Guang, Yang, 'Introduction: Geopolitics of Transnationalization of Chinese
National Oil Companies’, Perspectives on Global Development and Technology No. 13, BRILL, [a] Unit of Analysis and the Political Economy of Energy, p. 498, (2014)
27 variables of a coherent answer to the proposed question. The first variable entails that China’s energy policy is heavily influenced by internal consumption dynamics.
Hypothesis 1: As a result of increasing energy scarcity, China’s foreign energy policy seeks supply security by employing national oil companies as vessels for strategic investments in resource-rich countries.
China’s political reaction to its growing demand for energy reflects a diversification oriented policy approach dictated by the country’s upper echelon ruling elite. The main import destinations of these policies revolve around resource-rich regions such as the Middle East, South America, Africa and the Caspian Sea. In order to acquire access to these regions abundant reserves of oil in addition to other type of resources, China uses NOCs as investment instruments for securing government interests.
Hypothesis 2: In order to secure access to Brazil’s energy resource market, China has increased its bilateral cooperation efforts in three key fields: trade, investment and finance.
The base of the current Sino-Brazilian relations represents a highly cooperative partnership fuelled by bilateral trade, energy sector investments, technological cooperation and financial support. Ultimately, these IPE-oriented state-to-state connections revolve around China’s access acquisition to Brazil’s primary resources market.
Hypothesis 3: In a geopolitical context, China’s multi-faceted involvement in Brazil supports the ideas of multilateralism and questions US hegemony in the region, all the while leading to more cooperation and stability in the future.
South America has traditionally been under a US zone of influence, thus, any foreign involvement is seen as either a direct or potential threat to US interests in the region. China’s multi-faceted partnership with Brazil and their mutual support for multilateralism creates serious geopolitical impediments to the current Western-led world order and global financial institutions. Therefore, such strategic developments require further analysis and research.
1.5 Operationalisation and Methodology
Following the theoretical framework formulated earlier, this section will cover the research’s operationalisation by incorporating literature review and methodology into one coherent piece.
The first part of this work tackles the reasons behind China’s energy-oriented predicament. Chinese policy on supply security and diversification will provide the basis for this observation, while Amineh and Houweling’s resource scarcity model will serve as the analytical concept, which facilitates the expansion of states behaviour towards resource-rich countries. The variables that will fuel the concepts argumentation will be based on economic indicators related to: population size and growth; GDP size and growth; rising per capita income; technological change; per capita energy consumption in China; per capita energy consumption in electricity values and per capita energy consumption in transport values. Then, with the help of secondary data and primary sources, a structured illustration of power distribution in the PRC will be made, in order to better grasp which governmental body holds the country’s decision-making power. In a final step, conceptualising state-market relations will explain the role national oil companies play in the cross-border activities of Chinese interests abroad. As state related data and information is subjected to limitations due to the restricted character of authoritarian China, this research will limit itself to the veracity of data provided by the National Bureau of Statistics of China. In addition, qualitative reports from the U.S. Congressional Research Service, the East Asian Institute and official Chinese Ministry websites will further enhance the process.
The second part of this research will deal with a detailed assessment of Sino-Brazilian relations. Tracing diplomatic relations with China to their genesis will allow for a clear view in order to see all agreements and cooperation initiatives the partnership has produced throughout the years. By gathering and assessing quantitative data from domestic Brazilian statistical agencies, an actual picture of the gains and losses of China-Brazil bilateral trade, investment and finance will be formed. Data from the Agência Nacional Do Petróleo, Gás Natural E Biocombustíveis (ANP)44, Banco Central do Brazil and statistical and adjustment documents from Petróleo Brasileiro S.A. will
29 provide essential data on the actual state of Brazilian economics and its energy sector. Reports from the U.S. Securities and Exchange Commission and official documents from Petrobras will shed light on Chinese NOCs investment participation in energy infrastructural projects and concession-based contracts in the Brazilian energy sector.
The final part of this research will focus on exploring the geopolitical dimensions of China’s involvement in Brazil and the potential implications for US hegemony in the region as well as for the partnership itself. Following the logic of the proposed theoretical framework of Amineh’s brand of critical geopolitics as well as the previous section’s analysis of IPE factors, this section will question the degree of reciprocity between Brazil and China in their bilateral relations. By analysing China’s particular approach towards the South American country and region, this research will achieve a clear perception of how the PRC engages the continent and how fruitful its tactics are. America’s geopolitical interests in the region will also be assessed in comparison to the growing economic and even military presence of China in Brazil. Here, U.S. House of Representatives Testimonies, Congressional reports and independent security think-tanks papers will deliver the most accurate picture of how the United States perceives China’ multilateral goals.
Ultimately, this research follows a mixed methodological matrix, requiring both quantitative data and qualitative viewpoints to achieve a comprehensive response to the proposed research question. In this research, quantitative data will be compiled from national statistical agencies covering sectors relevant to the discussed topic, ministerial data on outward foreign direct investment and international energy agencies data that offers short, medium and long-term outlooks as well as current information on the global energy market (e.g. EIA, IEA, World Bank, IMF, World Energy Council, etc.). Because of their inherent structure, quantitative data collection methods offer precise ways of assigning statistical data to issues in addition to quantifying attitudes and opinions from a pool of variables. On the topic of China’s energy supply security, quantitative research offers insight into a numerical representation of the rapidly changing economic indicators of the socialist state and its South American partner. It will then be up to this research to choose the relevant indexes and correctly assign them to the discussed issues.
In combination with the quantitative data collection, a qualitative based research will provide a blueprint for a deeper form of problem analysis. An exploration of primary and secondary sources will serve as this type of research’s collection method. The insights provided by scientific journals, specialised books, discussion papers, briefing papers, reports and commission hearings will help gain an understanding of the underlying reasons, causes and motivations. By synthesising the general ideas expressed in these sources, this research will offer a clearer picture of the current trends and opinions surrounding the debate. Furthermore, this exploratory research will help navigate the thesis’s hypotheses to the proposed research question.
1.6 Work Structure
This thesis follows a five-part structure. Chapter 1 offers and introduction into the research design of the work, followed by Chapter 2 which will cover China’s current energy challenges and its internal power structure responsible for the formulation of policy and overall state-strategy. Chapter 3 will then study the nature of China’s relationship with Brazil by focusing on its diplomatic and economic elements, giving specific attention to trade, investment and finance. Chapter 4 will build on the previous chapters by applying their findings into a comprehensive assessment of Sino-Brazilian geopolitical impediments and challenges to US hegemony in the region and beyond. Finally, a concluding chapter will synthesise each chapter’s own conclusion, present any new findings and offer a directional recommendation for further academic involvement.
Chapter 2. China’s Energy Condition and Security
2.1 Introduction
The origins of China’s energy security efforts and its vested interest in diversifying its import destinations can be traced to one essential economic force - the growing energy demand. Since 2013, China has become the number one total primary energy consumer country in the world45 . With electricity, transport and household consumption witnessing spikes in total percentages, the supply of oil, gas and coal has become even more important for the preservation and ultimately survival of the Chinese sectoral economy. This is why, following the general framework illustrated above (see Chapter 1), this chapter will need to answer in a comprehensive way: What is the logic behind China’s energy policy and its supply security strategy and what role does Chinese NOCs play in the process? To achieve a conclusive and comprehensive response, several steps must first be made.
Firstly, an overview of China’s energy situation and challenges will be discussed following the logic behind Amineh and Houweling’s resource scarcity model46. This section will later serve as a contextual reference to the country’s corresponding energy policy and state actions. Secondly, an examination of the nature of China’s power structure and decision making process, will provide necessary insight into what forces are involved (institutional or otherwise) and who makes the final decision in regards to policy content and direction. In the third section, China’s energy related policy and general FYPs are examined as practical cases of the state’s official goals. Section four discuses the nature of Chinese national oil companies’ relationship with the state and their role in procuring energy security abroad. A conclusion will then summarise the key points of each section in a coherent piece, thus answering the proposed sub-question.
45 U.S. Energy Information (EIA), ‘China's Key Energy Statistics’, Total Primary Energy Production,
(2013), http://www.eia.gov/beta/international/country.cfm?iso=CHN, Last visited on: June 1, 2016
46 Amineh, M. P. and Houweling, H., 'Global Energy Security and Its Geopolitical Impediments - The
Case of the Caspian Region’, Perspectives on Global Development and Technology No. 6, BRILL, (2007)
2.2 China’s Energy Predicament
Guided by an ambition for economic reforms and partial liberalisation, China’s push towards market principles in the late 1980s and 1990s led the country to an unprecedented growth rate and higher development levels47. A Going-global strategy starting in 1999, focused on improving resource allocation practices and increasing Chinese firm’s international competitiveness48. This decades-old process helped revitalise the Chinese private sector to the point where in 2012, it constituted more than half of the country’s GDP49. Changes such as this have been felt throughout and have been able to affect not only the economy as a whole but the social composition of the state.
However, no change is more evident and more pressing than the increase of size and scale of China’s energy consumption. Total primary energy output and total energy consumption levels have been rising in an extremely fast pace in the People’s Republic, between the years 1990 and 201250. The driving force behind China’s industrial expansion and development has long been the use of coal51. Although ranking at third
place in terms of total proved reserves (12.8% at the end of 2014), China is still the number one producer and consumer of the dirty fuel, reaching averages of up to 50% share of world total52. All these accolades, however, contribute to more than just an increase in production and investments.
47 Scissors, Derek, ‘Deng Undone: The Costs of Halting Market Reform in China’, Foreign Affairs, (May
- June, 2009)
48 Salidjanova, Nargiza, ‘Going out: An overview of China’s outward foreign direct investment’, USCC
Staff Research Report, p. 4, (March 20, 2011)
49 Yiyuan, Ying, ‘Private sector contributes over 60% to GDP’, China Central Television, Available at: http://english.cntv.cn/program/bizasia/20130206/105751.shtml, (June 2, 2013)
50 China Statistical Yearbook 2015, Energy, Figure 9-3
51 U.S. Energy Information (EIA), ‘China: International energy data analysis’, Coal, May 14, 2015, https://www.eia.gov/beta/international/analysis.cfm?iso=CHN, Last visited on:
April 10, 2016
52 British Petroleum, BP Statistical Review of World Energy, Coal, p. 30, (June 2015), http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.htmlAvailable, Last visited: April 10, 2016
33 Figure 1: China's energy consumption by fuel type, 2012
(Source: U.S. Energy Information Administration; graph by author)
Currently China makes up for 1/5 of the world’s population (1,364,270,000 people) and has an annual growth rate of 0.5%53. A substantial amount of energy is needed in order to accommodate the general population’s basic nutrition, electricity, transport and housing needs. China’s GDP has continued to make supporting citizens’ energy needs possible despite recent growth slowdowns54. As a result, energy statistics compiled by the National Bureau of Statistics of China show a twofold annual per capita increase of energy consumption by Chinese households between the years 2000 and 2012 and a quadruple annual per capita increase in household electricity use55. This mixture of population growth, electricity consumption and increase of petroleum use in the transport sector have accentuated China’s excessive need for energy and lead to a high level of import dependency.
As environmental concerns continue to grow more serious, further stigmatising the use of coal, the availability and consumption of oil becomes more and more synonymous to national energy security. With coal accounting for nearly 66% of total energy consumption, crude oil takes the second place as most important source at 20% of the
53 World Bank, ‘World Gross Domestic Product (GDP) List for 2014’, World Development Indicators
Database, (February 17, 2016)
54 Ibid.
55 China Statistical Yearbook 2015, Energy, Figure 9-13
65% 20%
8%
5% 1% 1%
total56. Since 1990, in a matter of 10 years, China has managed to transition from a petroleum exporting country into a petroleum importing powerhouse, more than tripling the 1990 export average57. In the years leading to 2012, the country managed to then
quintuple the 2000 import average and as of 2014, it has become the number one net importer of crude oil in the world reaching a staggering 6.1 million bbl/d58. Nevertheless, what transforms China’s vision for a sustainable economic development into an energy predicament scenario is the limited availability of primary resources or in this case, the finite amount of oil. It is the increased resource scarcity in both domestic and global energy sectors that directly correlates to the enhancement of energy security in industrialised states59. Energy scarcity, therefore, is a key element in understanding in what direction would rising economies go in order to sustain their continued production of wealth and power.
Amineh and Houweling provide a working model that classifies state action in the field of global energy governance as dependent on the effect of specific scarcity types. According to this model, China can be categorised as constrained by a "demand-induced” and a "supply-"demand-induced” scarcity types. Demand-induced scarcity is caused by three factors: population growth in consuming countries, rising per capita income in major per capita consumers and importers, and in late industrialising economies and technological change60 . Supply induced scarcity, on the other hand, although intertwined with the demand, focuses more on anticipatory factors provoked by sudden increases in awareness of decreasing stock61. Such fears lead suppliers to increase
prices, which then provokes competition among resource dependent states desire for control over stock or territory62. Following this model, state behaviour can adequately be characterised as energy preoccupied. China’s demand-induced scarcity situation
56 U.S. Energy Information (EIA), ‘China: International energy data analysis’, Petroleum and Other
Liquids, May 14, 2015, https://www.eia.gov/beta/international/analysis.cfm?iso=CHN, Last visited on: April 10, 2016
57 China Statistical Yearbook 2015, Energy, Figure 9-4
58 U.S. Energy Information (EIA), ‘China: International energy data analysis’, Petroleum and Other
Liquids, May 14, 2015, https://www.eia.gov/beta/international/analysis.cfm?iso=CHN, Last visited on: April 10, 2016 & China Statistical Yearbook 2015, Energy, Figure 9-4
59 Amineh, M. P. and Houweling, H., 'Global Energy Security and Its Geopolitical Impediments - The
Case of the Caspian Region’, BRILL, p. 374, (2007)
60 Amineh, M. P. and Houweling, H., 'Global Energy Security and Its Geopolitical Impediments - The
Case of the Caspian Region’, BRILL, p. 374, (2007)
61 Ibid., p. 374 62 Ibid., p. 375
