Energy, Connectivity and Influence: China’s Belt and Road Energy Strategy Pursued in South Asia

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MASTER INTERNATIONAL RELATIONS: EAST ASIAN STUDIES

Energy, Connectivity and Influence:

China’s Belt and Road Energy Strategy Pursued in South Asia

by

Josien Jacobien Dümmer s3558568

Boezemsingel 25 1821 AH Alkmaar, +316 23434192

First supervisor:

Prof. Dr. Coby van der Linde

Second reader: Prof. Dr. Jan van der Hart

February 2020 21,152 words

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DECLARATION BY THE CANDIDATE

I hereby declare that this thesis, “Energy, Connectivity and Influence: China’s Belt and Road Energy Strategy Pursued in South Asia”, is my own work and by my own effort and that it has not been accepted anywhere else for the award of any other degree or diploma. Where sources of information have been used, they have been acknowledged.

Name: Josien Jacobien Dümmer Date: 12 February 2020

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Abstract

In a globalized age, bounded by the finite supply of resources, the role of energy and the ability of a state to secure its supply is transforming modern-day power politics. The People’s Republic of China (PRC) recognizes this development and has prioritized safeguarding energy security and external energy relations in the 2013 announced Belt and Road Initiative (BRI). The pursuit of this energy strategy has however, in recent years, faced increased setbacks. With BRI cooperating governments, alarmed by the economic and environmental burden of numerous energy projects, withdrawing from key agreements, labeling Beijing’s actions as corresponding to those of a revisionist power.

This study explores the extent to which these claims hold true in the case of China’s neighboring and energy crisis-afflicted region of South Asia. The research’s argument is developed through a mixed qualitative and quantitative inquiry that explores the BRI energy strategy and its implementation in South Asia. This method is combined with a case study analysis of Beijing’s energy diplomacy as exercised in the China-Pakistan Economic Corridor (CPEC). The findings derived in these sections are tested against the developed conceptual framework, covering three key components of the realist paradigm: (1) zero-sum game; (2) national interest; and (3) balance of power.

This thesis argues that the pursuit of the BRI’s energy strategy in South Asia is, to a significant extent, in apt with the realist paradigm. The contrast between Beijing’s advancement towards fossil fuel energy sources, despite a ‘green’ policy rhetoric, captures this link. The case study of CPEC illustrates China’s expansion into the political, strategic and economic space of South Asia vis-à-vis Pakistan and the role of energy as a soft power tool for facilitating ties. These findings show, that through the adopted lens, Beijing largely holds characteristics of a revisionist energy power and is pursuing energy diplomacy in order to further transform the regional energy order to its interests.

Keywords: Belt and Road Initiative, energy diplomacy, China-Pakistan Economic Corridor, South Asia, realism

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Acknowledgement

First and foremost, I thank Prof. Dr. Coby van der Linde under whose supervision I have completed this thesis, for her guidance and expertise that have steered my thesis to the final result. My gratitude further extends to Lilo Henke for making valuable comments that have sharpened my work. Finally, my deepest appreciation goes to my family and Cees, for their endless support throughout my years of study.

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Abbreviations

AIIB Asian Infrastructure Investment Bank ABC Agricultural Bank of China

ADB Asian Development Bank

BCIM Bangladesh-China-India-Myanmar Economic Corridor BOC Bank of China

BoP Balance of Power BRF Belt and Road Forum BRI Belt and Road Initiative CCB China Construction Bank CCP Chinese Communist Party CDB China Development Bank

CPEC China-Pakistan Economic Corridor CPPA Central Power Purchasing Agency FYP Five-Year Plan

FTA Free Trade Agreement

GEIDCO Global Energy Interconnection Development and Cooperation Organization GCC Gulf Cooperation Council

GDP Gross Domestic Product

ICBC Industrial and Commercial Bank of China IMF International Monetary Fund

IR International Relations

JCC Joint Cooperation Committee KLP Keeping Low Profile

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MoU Memorandum of Understanding NDB New Development Bank OFF Other Further Flows POE Private-Owned Enterprise PPP Purchasing Power Parity PRC People’s Republic of China

SAARC South Asian Association for Regional Cooperation SEC South Asian Energy Center

SEZ Special Economic Zone SFA Striving For Achievement SOE State-Owned Enterprise SRF Silk Road Fund

TPES Total Primary Energy Supply

UNFCCC United Nations Framework Convention on Climate Change

WB World Bank

GW Gigawatt

KTOE Kilotonne of Oil Equivalent

MW Megawatt

RMB Renminbi (yuan)

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Chapter I: Introduction

1.1. Context

“We will not follow the old way of geopolitical games (…) but create a new model of win-win and cooperation.”

- Xi Jinping With visionary rhetoric, in a speech held at the Nazarbayev University in Kazakhstan in May 2013, Chinese president Xi Jinping introduced a new path for the People’s Republic of China’s (PRC, hereinafter China) foreign policy, by the announcing of the Belt and Road Initiative (BRI) (Cai and Lau 2017). This global development strategy aims to enhance cross-continental connectivity through hard and soft infrastructural development along two central geographical components: the Silk Road Economic Belt and the Twenty-First-Century Maritime Silk Road (Goodman and Hillman 2019). Currently stretching over 88 partner countries and non-governmental organizations (NGOs), 61 percent of the global population and accounting for one third of global GDP, the initiative has become an indispensable dimension of current-day global affairs (Zhang, Xiao and Liu 2019, 1-2; Zhang, Alon and Lattemann 2018, 2).

However, seven years since announced, and five years since operationalized, an expanding gap between altruistic rhetoric and localized implementation has created disillusioned sentiments among BRI member countries, with prominent projects and agreements being withdrawn (Ye 2019, 710). It has reinforced a new wave of a ‘China threat’ discourse in public and scholarly perception, with cases reinforcing BRI’s negative effects of debt diplomacy, environmental degradation, and limited local benefits dominating the western narrative of the initiative (Goodman and Hillman 2019). Specifically, in light of the 2015 Paris Agreements and the announcement of the ‘Green BRI’ in 2017, energy, and overseas energy investment, have been viewed through an increasingly controversial light (Umbach 2019, 4). Given that 90 percent of China’s external energy investments are channeled into fossil fuel projects in climate-vulnerable developing countries (Nakano 2019). Western and regional observers are labeling such actions by China as those of a revisionist power aiming to secure economic and political influence (Shanahan 2019, 7).

The neighboring region of South Asia has been a prominent recipient of these investments. Compromising of Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka, the region forms a significant component of the BRI for its geostrategic location connecting the ‘Belt’ to the ‘Road’, as well as its abundance of untapped potential for

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mineral resources (OECD 2018). China has significantly engaged with the region in aiming to secure the maritime energy route and, through this process, has further deepened political and economic dependencies (cases seen in Sri Lanka1_{, Myanmar}2_{and Malaysia}3_{) (Chauhan 2019).}

This energy dimension of the BRI, as well as the 2013 announced China-Pakistan Economic Corridor (CPEC) - running through the Pakistani-controlled Kashmir, a region claimed by both Pakistan and India – are reason for strategic concern for India (Prashad 2019). It has reinforced a sentiment that China is establishing a ‘string of pearls’ along the Indian Ocean in order to expand its regional leverage and challenge India’s dominance (Eisenman and Heginbotham 2018, 120).

This thesis provides a voice to the ‘China threat’ and revisionist concerns through an exploration of the driving forces behind China’s BRI energy strategy and the use of foreign policy in order to achieve these goals. It aims to objectively challenge altruistic motivations of win-win cooperation and questions existing controversies concerning China’s realist notions, through the regional lens of South Asia.

1.2. Research Question and Objectives

The main objective of this thesis is three-fold. First, this study aims to explore the motivations behind the BRI energy strategy and China’s role in ‘green’ energy governance. Second, it examines the role of the strategy and its drivers in South Asia for China to pursue its energy goals. Third it explores, through a case study, the implementation of the strategy and how it aligns to energy investment priorities in South Asian nations. For this, energy strategy is defined as policy directed towards the energy sector, including industrial activity and type of fuel (Gopal, et al. 2018, 4) .

By adopting an International Relations (IR) realist lens, this thesis makes an empirical case to test theoretical assumptions in contemporary politics surrounding energy. In doing so, it aims to adopt a structural, multifaceted and politically unbiased perspective towards the BRI and its underlying dimensions. This will be studied through the central research question:

1_{The Hambantota Port was handed over to Chinese firms for a ninety-nine year lease in December 2017 due to} Colombo’s inability of repaying debts to Beijing (Panda 2017).

2_{As part of the China-Myanmar Economic Corridor (CMEC), a port in Kyaukpyu is being built. Fearing the} debt trap, Myanmar is downscaling the project and further restricting Beijing’s advancement of the CMEC (Nitta and Hadano 2020).

3_{Facing bankruptcy based on a 22 billion USD rail link and two gas pipeline projects, Malaysia is attempting to} cut back on BRI involvement and projects (Ma 2018).

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To what extent is Beijing’s pursuit of the Belt and Road energy strategy in South Asia revisionist, with regards to Sino-South Asian energy relations?

In accordance to the objectives and in order to establish a coherent argument towards the research question, this thesis will explore the following sub-questions:

1. What are the key features of the Belt and Road energy strategy?

2. What are the motivations for the Belt and Road energy strategy to be pursued in South Asia?

3. How is the Belt and Road energy strategy implemented in Pakistan?

The case study of Pakistan has been selected based on its timely relevance and BRI political, economic and strategic significance. This due to CPEC being the ‘flagship’ project of the BRI and its energy sector receiving the largest regional financial shares from China (Samaranayake 2019, 3). In exploring this case, within the context of South Asia’s energy order, will offer a fruitful perspective on the impact of the BRI on the region and nationally for Pakistan.

Moreover, given that the BRI was announced in 2013, the six-year timeframe of 2013 to 2019 will be adopted throughout the research. This will allow for changes in foreign policy and ideology dynamics after Xi Jinping’s 2012 presidency to be explored. However, when assessing trends for the effects of the BRI on South Asia, a broader ten to twenty-year timeframe will be used in order to make a comparative assessment of the changes in foreign policy outlook and their effects on the region.

1.3. Structure

This thesis addresses the central operational research question and sub-questions through exploring two interrelated topics: (1) The BRI’s energy policy and (2) its implementation in South Asia. This divides the empirical research content into two main parts, with prior chapters laying the theoretical and methodological foundations of the thesis (schematic overview presented in figure 1). The paper proceeds as follows:

Chapter II ‘Theoretical Framework’ sets the thesis in the wider academic debate by conceptually exploring the theoretical assumptions behind ‘revisionism’ through the debate on realism, energy and China’s foreign policy. The viewpoints of this debate will be used to develop an analytical framework to be applied in the empirical inquiry of the thesis.

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Subsequently, Chapter III ‘Research Design and Methodology’, outlines the research method and critically discusses the data employed in the study. This includes an exploration of the features, reliability and limitations of case study analysis and a mixed qualitative and quantitative approach.

Chapters IV, V and VI provide the empirical inquiry of the study. First, Chapter IV adopts a macroscopic level view of the development, features and role of the BRI’s Energy Policy. Subsequently, the main drivers of the strategy towards South Asia are assessed in Chapter IV, addressing the link between policy and energy and allowing for an analysis to be made on the appeal of the region for China. Lastly, Chapter VI adopts a microscopic view of the BRI energy strategy through the case study of Pakistan. This allows for Sino-South Asian energy relations to be explored through a narrow lens and their potential realist aspects.

Chapter VII ‘Discussion and Conclusion’ provides a summative and critical account of the research findings, formulating a response to the guiding research question. It aims to link the empirical findings with the theoretical framework, and concludes with a future outlook on the trends and developments of Beijing’s BRI energy diplomacy.

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1.4. Significance of Study

A prominent focus in the global discussion on the phenomenon of the BRI is China’s external strategy for the developing world. The dominant narrative in such debates highlights the BRI’s regional impact on predominantly the regions of Southeast Asia or Africa, often adhering to the ‘China threat’ discourse (Goodman and Hillman 2019). This thesis’ motivation is to depart from the existing speculative landscape, addressing the measurable impact of the BRI energy strategy through a systematic and politically unbiased approach in the context of an arguably relatively under-researched area of South Asia. Allowing the research to be relevant for the following three reasons.

First, Western study on the BRI lags behind the pace, scale and impact of the initiative (Rolland 2017, 3). This research aims to map the tangible effects of the projects implemented and compare this to the policy vision in South Asia. Therefore it serves as a timely exploration of the correlation between policy and practice of BRI projects and the influence this exerts. Its focus on South Asia is significant as this region has arguably been a cornerstone to the development of the BRI, being an intimate neighboring region of China characterized by the unspoken rivalry with India (Eisenman and Heginbotham 2018, 102). Additionally, the CPEC is significant for being the first corridor to be operationalized and described by Xi as ‘the project of the century’ (Downs 2019, 9). The case study allows for a close analysis of both a region and a country – Pakistan – and assess Beijing’s adoption of a grand strategy pursued in a regional and bilateral context.

Secondly, the contributions of this thesis lie in the field of energy and its strategic value as a foreign policy tool. Through the study of the trends of China’s energy diplomacy in the developing world (South Asia) since the BRI, this thesis aids to the understanding of China as a regional and global energy leader. This can inform policymakers on the sustainability of China’s energy strategy and its prospects for future cooperation. While existing literature prominently focuses on the connectivity through infrastructure construction – e.g. highways, little work has been done on the impact of energy. Given that largest sector of the CPEC is energy, this research sheds light on the effects of energy as a foreign policy and strategic tool for China in the BRI (Woods 2017).

Lastly, this study explores a key, and arguably underexplored, dimension of the BRI, namely the effects of the BRI energy strategy on the climate-vulnerable region of South Asia. This study sheds light on China’s contribution to the developing world and its commitment

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towards the environment. It allows for an exploration to be made on the strategies China employs and the magnitude of the implied environmental and political threats. It also addresses the role of realism and its utility in the contemporary era. As realism is traditionally associated with security and military concerns (see chapter II), adopting this lens in the study of energy offers a novel perspective to the academic debate.

Therefore, this thesis ultimately showcases South Asia from the perspective of Beijing, as a case study to a global energy governance trend as defined by China. The thesis makes contributions to our understanding of the BRI and how it guides energy foreign policy, and how western nations can be responsive to this.

1.5. Research Scope and Limitations

Being reliant on published literature throughout the study, this thesis is limited in its methodology with regards to access to sources in the derived research findings. It lacks a first-hand perspective and data for China’s energy involvement in the case studies, which can be considered a significant limitation. The effects of this limitation are however aimed to be reduced, as expanded on in Chapter III (section 3.5).

With the features of the research being set on the BRI energy strategy within the region of South Asia, this thesis adopts a narrow scope. Thus this thesis is limited in its consideration. However through exploring a single dimension and region it aims to produce context-specific results. This is further reinforced through the microscopic view on the case study of Pakistan, which limits the research’s ability to make overarching explanatory statements and generalizable recommendations for the entirety of the BRI. Nonetheless through its in-depth approach, a valuable and timely insight can be produced with regards to the energy dimension of the BRI. This scope therefore fits with the ultimate purpose of this thesis, aiming to function as an analytical device to aid the understanding of Beijing’s energy foreign policy.

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Chapter II: Theoretical Framework

Since the dawn of the century, the topic of ‘China’s Rise’ and its prospective economic and political effects on the current international order has been a prominent topic of political and scholarly debate (Zhao and Liu 2009, 3). However with the announcement of the BRI and Xi Jinping’s presidency, this topic has further advanced into the public sphere, with the question of Beijing’s geopolitical motivations as the principal puzzle (Singh 2019b).

This chapter explores these perspectives and develops the study’s framework of analysis. It does so through the exploration of the theoretical debate on two interwoven sections (see figure 2). First, section 2.1. deals with ‘Energy Diplomacy’, as this concept arguably equates to the theoretical understanding of Beijing’s pursuit of the BRI energy strategy. The second section 2.2. ‘Energy and Realism’ explores the link between the IR framework of the realist paradigm and power exertion through the energy sector. Both sections are followed with subsections linking the conceptual debate to China. These perspectives form the building blocks to the research framework.

Figure 2: Theoretical Framework Development

2.1. Energy Diplomacy

Within scholarly discussion, the relationship between the global market for energy resources and politics has become increasingly recognized as interlinked in scholarly discussion (Huda and Ali 2017, 205). American scholar Brenda Shaffer prominently outlines this relationship in her 2009 book “Energy Politics”. Herein Shaffer highlights the significance of safeguarding energy security as central to the foreign and national security policies of a state, given the

China's

Energy

Strategy

Energy Diplomacy Energy and Realism

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inability of a market to guarantee its supply (p. 3). This due to the functionality of a country to effectively access energy supplies and how it is allocated ultimately determines the state of its economy, security and environment. This utility defines the features of energy security as: (1) resource affordability; (2) supply reliability; and (3) environmental friendliness (p. 1-3). Therefore, according to Shaffer, energy both shapes foreign policy development as well as stirs the use of economic, military and diplomatic tools in order to advance foreign policy (p. 28).

This account of energy politics has been termed ‘energy diplomacy’ in IR, and is most commonly defined by analyst Andreas Goldthau (2010) as: “the use of foreign policy to secure access to energy supplies abroad and to promote (mostly bilateral, that is, government-to-government) cooperation in the energy sector.” (p. 28). Goldthau therefore argues that governments seek cooperation in order to achieve energy security (p. 25). This emphasis on stakeholder interests, cooperation and policy processes is too shared by South Asian scholars Mirza Huda and Saleem Ali, who explore the role of energy diplomacy in the South Asian Turkmenistan-Afghanistan-Pakistan-India pipeline project. The scholars define energy diplomacy as “the deliberate use of energy projects to facilitate cooperation, reduce tensions and encourage interdependency through the use of stakeholder consultation” (p. 205). This description emphasizes policy processes and the exploitation of mutual interests. It is significant as few analysts explore the role of transnational energy infrastructures as channels of energy diplomacy, which Huda and Ali emphasize with pipelines (Huda and Ali 2017, 205).

These definitions as depicted by Shaffer, Goldthau, and Huda and Ali recognize the state as the principal agent in order to secure energy supply (Shaffer 2009, 29; Goldthau and Witte 2010, 28; Huda and Ali 2017, 205). However, this is deemed too simplistic by IR scholar Diego Santos Vieira de Jesus (2013), who argues that non-state and non-governmental actors play an often unrecognized yet significant role in shaping the dynamism of energy diplomacy. Where domestic, regional and international institutions and companies exercise influence in shaping state preferences and policies for the energy sector (p. 500).

This difference aside, the aforementioned scholars all recognize the significance of energy capacities as foreign policy tools in order to both deter national risks and influence the direction of international events in pursuit of national interests (Santos Vieira de Jesus, 500). This process is known as ‘soft power’, as coined by political scientist Joseph Nye who defines it as the ability of a country to entice other states to develop interests that is consistent to their own. Nye describes it is a form of influence that rests on co-option, rather than coercion, in shaping the preferences of others (Nye 2008, 94-95). This includes developing common

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understandings on energy security, showing its utility in acting as a significant foreign policy tool (Nye 1990, 157).

The understanding of energy as a soft power tool is shared by scholar Daniel Scholten (2018), who sets the debate in the current day and age with the expanding role and influence of climate change on politics. Scholten argues that states engage with the narrative of renewable energy in order to attract support and move up in the global hierarchy (p. 11). Scholars Sarah Ladislaw and Nikos Tsafos too share this perception as exemplified in their 2019 ‘Energy Spheres of Influence’, suggesting how countries employ policy in order to react and compete in the new market environment while meeting domestic goals (p. 2). Alluding to a rising competition in the untapped global resource-rich areas e.g. developing economies in Africa and the Arctic (p. 3).

2.1.1. China and Energy Diplomacy

For China, being both an energy producing and importing country having experienced rapid economic growth, safeguarding energy security is high on its foreign policy agenda (Snelder 2014). This has both economic as well as security implications, where in order to safeguard domestic stability, China will need to meet the demands with an increasingly limited supply (Rolland 2017, 111-112). Therefore, China has deepened its overseas relations with mineral rich and energy-producing countries to safeguard energy resources (Kavalski 2009, 167; Lee 2019).

Scholar Kaho Yu (2019) defines this energy diplomacy by China as: “a bilateral way of coordinating energy policy that includes diplomatic relations, economic agreements, and foreign direct investment between two countries” (p. 246). This is achieved by government-involved foreign activities that aim to secure an overseas energy resource supply and promote energy business cooperation (ibid.). However, according to Yu, this system of energy will move from bilateral energy diplomacy towards multilateralism and play an increasingly larger role in global energy governance (p. 244). Yu bases this hypothesis on the perceivable trend of China’s energy diplomacy where Beijing considers it vital to gain control over overseas resources in order to secure long-term supplies, develop a favorable environment for Chinese firms and avoid overdependence (p. 249). Energy diplomacy is therefore an extension of Chinese national interests, and overlaps with scholars Gopal, et al. (2018) reference to the ambition of China to secure raw material and energy supply, termed as ‘resource diplomacy’ (p. 3).

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This development is notable with the dynamic BRI and the growing role of energy and emphasis on sustainability (Hillman 2019b). China watcher Dominic Chiu from Hong Kong (2017) reflects this belief and argues how through coordinating green policy, China aims to become a global leader in renewable energy (p. 3). Beijing terms this as ‘ecological civilization’ – interpreted as environmental protection and sustainability – and aims to fill the leadership vacuum left by US’ increased isolationism and withdrawal from global environmental governance (p. 8). Scholars Ladislaw and Tsafos (2019) too portray China as an upcoming leader of the low-carbon world and argue how the West is falling behind on the development and pursuit of renewable energy (p. 4).

However, scholars are divided on the proactive nature of China’s green financing (Wang-Kaeding 2018). Director of the Center for Strategic and International Studies’ Reconnecting Asia Project, Jonathan Hillman (2019), states that there is a contrast between China as a leader in its rhetoric and the implementation in practice. This is also suggested by political analyst Frank Umbach (2019) who argues that even though China is seemingly getting ‘greener’, due to increased renewable energy sources in its energy mix, this is largely driven by economic and technological policies, rather than an ambition to fight global climate change (10). According to American scholar Barbara Finamore in her 2018 book “Will China Save the planet?” this is due to the priorities of national interest for China’s foreign policy and the recognition of Beijing of the unsustainable nature of an economy reliant on export-led industry powered by coal.

2.2. Energy and Realism

The control over (mineral) resources is a central component to global power politics and a significant aspect of a nation’s foreign policy (Luft and Korin 2009, 340). However, according to Daniel Scholten (2018), the topic of energy and its impact in shaping interstate relations has significantly lacked behind in global political discussion and the field of IR (p. 9). Yet when addressed in the debate, often an implicit realist view is proscribed (Huda and Ali 2017, 205). This use can be explained based on the characteristics of realism, having three inherent assumptions: (1) nation-states are the central players in global politics; (2) sovereignty characterizes the state; and (3) states are motivated by the aspiration to secure power and security (Steans, et al. 2013; Yee and Storey 2002, 7). Where a nation-state’s foreign policy objectives are, according to renowned IR scholar Hans Morgenthau (1973), either to: “keep power, to increase power, or to demonstrate power” (p. 40).

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This can be translated to the field of energy according to political scientist Giedrius Česnaka, who in his 2010 ‘Energy Resources in Foreign Policy’, addresses the interrelation between the control over strategic means of energy capacities and state power (p. 31). The afore introduced scholar Goldthau (2010) too employs the realist paradigm as a lens to explore the energy sector and argues that energy diplomacy coincides with the view of global energy politics as a zero-sum game. Where one country’s ability to safeguard energy supply is another country’s lack thereof (p. 25). These aspects show that primary energy resources are important elements of state power, where more resources equate to increased state power, and suggests the close link between realism and geopolitics (Luft and Korin 2009, 32-33). This is summarized by IR scholar Roland Dannreuther (2010) who develops three assumptions on realism and energy: (1) energy resources are becoming scarcer and insecure; (2) states will compete for access and control over resources; and (3) conflict over the resources is likely (p. 3). In Sarah Ladislaw and Nikos Tsafos’ 2019 ‘Energy Spheres of Influence’ these features are significantly articulated, where the political nature of energy relations is explored and the role of energy in order to increase state leverage and power (p. 1). This is termed by the scholars as ‘energy dominance’, being a strategy where energy represents for a given nation both a tool for increasing geopolitical influence in a region, as well as an area in order to maintain economic advantage (p. 2). These trends have significant effects for the Balance of Power (BoP) and the shifting geopolitical and market dynamics, as a strategic rivalry for energy influence between great powers grows (p. 2-3).

2.2.1. China, Realism and Energy

Since China’s opening-up to market reforms in 1978, a debate depicting China’s rise as a ‘status quo’ or ‘revisionist’ power erupted, with the latter far outweighing the former in the quantity of literature on the topic (Johnston 2003; Kavalski 2009, 166-167). This can be explained by Robert Gilpin 1981 “War and Change in World Politics” which explores how a state’s geopolitical aspirations grow with rapid economic growth, as this changes the BoP, fosters insecurity and consequently breeds potential conflict (p. 243). Within this context, the ‘China threat’ theory became a dominant perception of scholarly debate (Yee and Storey 2002).

Scholars Yee and Storey (2002) explore this development at the end of the 20th_Century.

Describing that coinciding with China’s quest to increase its economic potential, is the fueling of geopolitical ambitions to demonstrate power and challenge existing hierarchical relationships with policy aimed at achieving both regional and global hegemony (p. 7-8). United

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States (US) scholar Alastair Johnston (2003) too argues within this zeitgeist, suggesting how Western scholars distrust China, and critique Beijing’s actions for operating outside, and on the border of, international norms and standards. The rise of China would become a threat and fuel instability (p. 6-7). This falls in line with the hypothesis of offensive realist scholar John Mearsheimer in his 2001 book “The Tragedy of Great Power Politics”, in which he depicts China’s rise as a threat to the US-led world order (p. 103).

With Xi Jinping’s presidency in 2012, these beliefs have arguably been reinforced among realist thinkers. This based on Xi’s adoption of a more proactive approach to foreign affairs, unlike his predecessors, known as ‘Striving for Achievement’ (SFA). Central to this approach has been the aspiration for national rejuvenation in order to accomplish the ‘China Dream’. For realist thinkers this aspiration overlaps with the principles of ‘self-interest’ (Jie 2018, 3). Moreover, within this approach, ‘neighborhood diplomacy’ is central, which focuses on the promotion of regional peace, stability and development. According to Nadège Rolland, in his 2017 book ‘China’s Eurasian Century?’ this was due to growing concerns of US military and diplomatic presence in the region during the Obama administration’s ‘Pivot to Asia’ (p. 114-116). With both powers aiming to ‘re-balance’ their power position through establishing increased regional alliances that chimes with realist assumptions of the BoP (Kavalski 2009, 167).

The BRI, according to Sarah Ladislaw and Nikos Tsafos (2019) is a further attempt of China to expand its economic and soft power influence along the Indo-Pacific, and where energy plays a significant role in shaping the policy of regional powers (p. 5). According to political scientist Chi Zhang (2016), the realist perspective allows for the Chinese government’s engagement towards energy security and national interests to be explained. This as energy security is believed to be directly linked to the three pillars of the Chinese Communist Party’s (CCP) political legitimacy being: economic development, societal stability and national unity (p. 23). Where, Beijing believes competition among states for controlling energy resources is present due to the pursuit of safeguarding national interests and national security, as realism predicts (p. 24).

2.3. Summary

The review of the scholarly debate on the topics of energy diplomacy and realism in relation to China suggests the multidimensionality of the topic, and their strong interrelation. Sections 2.1.

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‘Energy Diplomacy’ and 2.2. ‘Energy and Realism’ provide the theoretical background to the conceptual debate and suggest how power is exerted through energy. Subsections 2.1.1 and 2.2.1 apply the concepts to the context of China and portray the aspects of the BRI’s energy diplomacy as the codification of a realist strategy. This through the state-centric approach to guaranteeing energy security as well as the role of BoP and national interest.

Based on these perspectives various features have been identified that encompass both the conceptual debate on energy diplomacy and realism. This is portrayed in Table 1 which gives a schematic overview of key features that will aid the development of the framework of analysis.

Table 1: Key Theoretical Framework Features Key Features Foreign Policy Tool State-centric Facilitate Energy Cooperation Soft Power Increase State Power Zero-Sum Game Resource Competition Balance of Power Energy Diplomacy X X X X Energy and Realism X X X X X X 2.4. Framework of Analysis

Based on the major positions taken by the range of scholars and the theoretical debate on realism and China’s energy policy, this section develops an analytical framework to be applied and tested in the main body of the thesis’ research. This will provide a measurable indicator towards the research question and determine the extent to which China’s BRI energy strategy is revisionist.

This framework is captured in Table 2, where the features of the debate are translated into three key features of realism: zero-sum game, national interest and BoP. For each of these aspects a hypothesis is attributed, adapted into the context of China’s energy strategy applied in South Asia. In evaluating the extent to which the hypotheses are met, a scoring legend (table 3) is used which distinguishes between high, medium, low, and zero correlation with the hypotheses and the research findings.

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In order to measure the degree to which these hypotheses are met, indicators are derived, which will be tested and explored in the case study (see section 3.2.). For this, the definition of energy diplomacy by Yu (2019) will be used, where energy diplomacy is the directing of foreign policy in order to safeguard energy security through engaging with (1) diplomatic relations; (2) economic agreements; and (3) FDI. These three factors will be used to characterize the implementation of China’s foreign policy in the case study, and serve as the dependent variables in the research.

Table 2: Energy Diplomacy Framework of Analysis

Table 3: Scoring legend

Aim Realism Aspect Hypotheses Score

Energy security

Zero-sum Game A win-lose relationship dominates Sino-South Asian energy relations National Interest Beijing advances energy preferences

in South Asia

Balance of Power Beijing exerts influence in South Asia through the deepening of energy ties

Degree of Correlation Score

China’s energy diplomacy in the case study

correlates significantly with the hypothesis High China’s energy diplomacy in the case study

correlates to some degree with the hypothesis Medium China’s energy diplomacy does not correlate

with the hypothesis Low

No findings that support the hypothesis are

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Chapter III: Research Design and Methodology

This thesis employs a literature-based methodology in order to reach the defined objectives. The rationale, application and limitations of this research method will be outlined in this chapter by means of four sections.

Section one provides an overview of the features and significance of the research methods employed. Section two ‘Research Design’ provides an overview of the methodologies applied to the objectives and sub-questions of this paper. Section three discusses the process of data collection, the sources utilized throughout the empirical inquiry and the process of data analysis. Lastly, section four critically explores the reliability of the developed methodological approach.

3.1. Research Method

The exploration of the extent to which China’s foreign energy policy is revisionist – the central objective of the paper – suggests a subjective process of measurement. Therefore, in order to safeguard objectivity and eliminate biases, this thesis adopts a multi-method model of a mixed qualitative and quantitative case study analysis. In doing so, the paper aims to stay close to the framework of analysis and the assumptions of realist theory that favors the ‘scientific’ approach of positivist ontology and epistemology (Klotz and Prakash 2008, 1).

Qualitative Research

Qualitative research refers to the exploration of meanings, definitions, metaphors and descriptions of a research topic (Lune and Berg 2017, 12). It therefore is an interpretive and naturalistic approach to the study of empirical materials and falls under ethnographic research (Newman and Benz 1998, 9 & 16). In IR, this research approach is most generally employed, as scholars are faced with analyzing non-standardized empirical data and provides scholars a tool to explore policy decision-making to a micro-historical level (George and Bennett 2004). This is further aided by the use of theories, as it provides a framework for analysis and a theoretical lens to explore specific cases (Collins and Stockton 2018, 4).

Quantitative Research

Contrastingly, quantitative research refers to the quantity and measures of standardized data (Lune and Berg 2017, 12). It assumes a common reality and the control of variables, and

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can be subsumed under the heading of empirical studies, or statistical studies (Newman and Benz 1998, 2).

Mixed Qualitative and Quantitative Research

Given that both research methods provide different lenses in the exploration of data, John Odell (2001) argues that a mixed-method of qualitative and quantitative research is most reliable as it provides more depth to a study. Qualitative research can be complementary to quantitative data in empirical research, providing an explanation to causality (Odell 2001, 171). This due to deceptiveness for selectivity and researcher’s bias present in qualitative research in the political field, as argued by Cameron Thies (2002). Thies further argues for the use of both primary and secondary sources as this allows for a broader explanation and understanding of the topic and increases the reliability of the data, which this thesis attempts to apply (p. 355). Robert Yin (2014) reinforces these beliefs suggesting a mix between quantitative and qualitative methods of inquiry are most suitable for political research in the context of case studies (p. 19). It allows for the production and modeling of theoretical understandings of a subject matter and assess the application of theory in real-life settings (Eckstein 1975, 119). 3.1.1. Case Study Analysis

A case study, as defined by Andrew Bennett (2004), is “the investigation of a well-defined aspect of a historical happening that the investigator selects for analysis” (p. 21). This definition highlights the positivist nature of the methodology, referring to studies that aspire to find causal explanations (ibid.). Robert Yin (2014) too recognizes this, yet further highlights the real-life aspect of the happening through a consideration of an open relationship between the case and its context. Yin defines case study analysis as: “an empirical inquiry that investigates a contemporary phenomenon in depth and within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident” (p. 18). Yin visualizes this ‘open boundary’ by depicting four types of designs for case studies: single-case or multiple-case and holistic or embedded (see figure 2 for the visualization of single-multiple-case and embedded study) (p. 46). Holistic refers to single units of analysis, while embedded to multiple units of analysis, where the distinction is dependent on the objectives of the study (Lune and Berg 2017, 171).

A case in scholarly discussion is most prominently defined as a “phenomenon for which we report and interpret only a single measure on any pertinent variable” (Eckstein 1975, 85). This definition is however disputed by Andrew Bennett (2004), who argues that this implies that a case can only provide a single observation towards the dependent variable, whereas each

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case can potentially produce wide-ranging observations and with intervening variables of study (p. 20). Bennett argues that a case should rather be defined as “an instance of a class of events”, allowing the researcher to explore the various causes and effects of the studied cases (George and Bennett 2004, 17-18).

3.2. Research Design

Having outlined the approach of case study analysis, this section applies the methodological fundamentals to develop a research design that is able to answer the research question(s). In table 4, an overview is presented of the sub-questions and the data collection methods applied to explore the derived indicators.

First, qualitative analysis offers an insightful tool in systematically evaluating and reviewing China’s energy foreign policy objectives and goals. As suggested by Barbara Finamore in a 2019 Center for Strategic and International Studies (CSIS) conversation with Bonnie Glaser, Beijing’s official political rhetoric is ought to be taken seriously and a close qualitative analysis should be applied in order to deconstruct the ‘vision’ of the BRI (Glaser 2019). In doing so, this thesis explores three categories of governmental published English documents: policy documents, speeches and press releases. However, as further expanded upon in section 3.4., this thesis acknowledges the limitations imposed on a study when utilizing translated documents. Where a layer of meaning can potentially get lost in translation, limiting the ability of the study to fully grasp a policy’s official narrative.

Furthermore, moving on to sub-questions 2 and 3, given that a case study analysis is explanatory in nature and provides an in-depth understanding of a topic, this method is apt for critically assessing Beijing’s pursuit in the context of South Asia through regional and national analyses. First a regional lens is applied through the exploration of political, strategic and economic drivers of the BRI energy strategy in South Asia (Chapter V), in order to assess potential revisionist aspects to Beijing’s motivations. These three drivers are selected based on both Sarah Ladislaw and Nikos Tsafos (2019) and Rolland’s (2017) examination that commercial and strategic incentives stimulate BRI activity (p. 5; p. 94). This thesis adds political drivers as it is indicative of political aspirations and influence (Eisenman and Heginbotham 2018, 227).

Subsequent sections in Chapter VI delve into the national lenses of the implementation of the policy in the case study of Pakistan. As defined by Yu (2019), three quantifiable foreign

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policy tools of Beijing’s energy diplomacy will be assessed for CPEC - diplomatic relations, economic agreements and FDI - as it produces a systematic and structural account of China’s energy strategy approach (p. 246). This method is visualized in figure 3, where Robert Yin’s (2014) single-case and embedded research design is adopted to the context of this study.

Table 4: Overview of Sub-question Methods and Indicators Sub-Research Question Data Collection

Methods Indicators

What are the key features of the Belt and Road energy

strategy?

Qualitative Analysis  Developments

 Aims What are the motivations for

the Belt and Road energy strategy to be pursued in South

Asia?

Mixed Qualitative and Quantitative Analysis

Drivers:

 Political

 Strategic

 Economic How is the Belt and Road

energy strategy implemented in Pakistan?

Mixed Quantitative and Qualitative Case Study

Analysis

Energy Diplomacy:

 Diplomatic relations

 Economic agreements

 FDI

Figure 3: Single-case and Embedded Case Study Design Context: China’s Energy Strategy Pursuit in the Belt and Road

Case: China-Pakistan Economic Corridor Diplomatic Relations

Economic Agreements FDI

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3.3. Data Collection and Analysis

This thesis draws on primary, secondary and database sources through qualitative and quantitative data collection approaches. As depicted in table 4, data surrounding the specified indicators will be explored in order to systematically assess the topic.

Using the aforementioned Cameron Thies’ (2002) argumentation, both primary and secondary sources are used in this research (p. 355). The data derived from these sources will be further complemented by the use of statistical data sources – therefore subscribing to a mixed qualitative and quantitative methodology. In doing so, this thesis engages with an interpretive approach of data analysis in order to reach a comprehensive understanding of the research objectives.

3.3.1. Primary Sources

Primary sources are original source materials, oral or written, of an event or experience. They are social attributes, produced in a particular time and place (Lune and Berg 2017, 161).

Such sources in this paper refer to the formal statements published by the Chinese and Pakistani government, including press and policy releases published by the Ministry of Foreign Affairs, the State Council, National People’s Congress, and the Ministry of Commerce of the PRC as well as BRI white papers. This provides an exploration of the official rhetoric of the BRI energy foreign policy and its aspirations, being a significant aspect of qualitative analysis (Thies 2002, 355).

3.3.2. Secondary Sources

Contrasting to primary sources, secondary sources are oral or written documents produced subsequent to the related event or experience (Lune and Berg 2017, 161). For the purpose of this study, this thesis engages with a comprehensive list of secondary sources ranging from peer-reviewed scholarly publications and reports to newspaper articles. These sources have been selected on their relevance to the research topic, reliability and quality.

3.3.3. Statistical Data Sources

In order to perform quantitative analysis of the case studies, statistical data sources are collected and processed. This is done in order to follow e.g. the financial flows of state-owned enterprises (identified in Chapter IV) as this allows for an exploration to be made regarding the state-led implementation of the BRI energy strategy. Database sets have been derived from: China Global Investment Tracker, Observatory of Economic Complexity (OEC), the World Bank (WB), British Petroleum (BP) and the Organization for Economic Co-operation and

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Development (OECD). This data is graphically represented through tables and/or graphs, produced using the electronic spreadsheet program Microsoft Excel.

3.4. Limitations and Reliability

As touched upon in previous sections, the developed approach faces theoretical and procedural limitations regarding methodology and utilized data sources.

For case study analysis, George and Bennett (2004) warn for case selection bias, difficulty in identifying scope conditions and ‘necessity’, limited representativeness, and potential lack of independence of cases (p. 22-34). In order to overcome these limitations and increase the reliability of the produced findings, this thesis employs a method of ‘triangulation’. The definition of triangulation differs depending on the researcher employing the strategy. Some scholars engage with the term as a mixed qualitative and quantitative methodology (Erzberger and Prein 1997, 141). However, scholars Howard Lune and Bruce Berg (2017) describe triangulation as the combining of several perspectives in the analysis of a phenomenon. This in order to engage with convergent validation – the gathering of data from multiple sources and methodologies - in order to increase the validity of the findings (p. 14).

These differences potentially stem from Norman Denzin’s 1978 ‘The research act: A theoretical introduction to sociological methods’ in which the scholar identifies four types of triangulation: (1) data; (2) methodological; (3) investigator; (4) and theory (p. 295). For the scope and objectives of this research – being a sole investigator and focused on realist theory - only the former two will be applied. The triangulation of data is when the researcher aims to link a multitude of datasets together to produce a finding, in order to further advance research credibility. Additionally, by using information which has been collected from a mixed-method approach – methodological triangulation - a researcher is able to corroborate findings and therefore potentially reduce the impact of biases (Bowen 2009, 28). This paper recognizes how methods impose a lens on reality, and therefore when combining methods it allows for researchers to obtain a more substantive image of their study area (Lune and Berg 2017, 14).

Moreover, with regards to data collection, this thesis faces limitations with regards to selectivity bias, as well as limits in available content (ibid., 200). This due to the dependency on primary sources that are published in English. These sources can lack a layer of meaning that is portrayed is the original source or, when acknowledging the international audience, contain forms politicized English. Joseph Alvaro in his 2013 article ‘Political discourse in

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China’s English language press’ further expands on this limitation and shows the meaning disparities found in Chinese and the ‘translated’ English lexis publications. Alvaro’s research predominantly explores China’s English language newspaper, the China Daily, and finds ideological characteristics in their publications (p. 147-148). In order to address the limitations, this thesis attempts to triangulate the information collected in order to produce a more accurate representation of the topic (Thies 2002, 359). Additionally when engaging with secondary sources, this thesis aims to critically assess potential implicit or explicit presentism and political influences on a work, and cross-checks the information to improve accuracy (ibid., 362).

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Chapter IV: The Belt and Road Energy Policy

This research section lays out the developments and features of the BRI and its energy policy. It serves as the contextual and policy background of the paper.

First, section 4.1. explores the development of the BRI. This places the research in the political and socioeconomic context of 2013 and addresses the ideological motivations as well as institutions that support the BRI. Subsequently, section 4.2. ‘China’s Energy Mix and Policy’ illustrates domestic energy demand and Beijing’s efforts of safeguarding energy security. Lastly, section 4.3. ‘The BRI’s Energy Strategy’ explores the policy and institutional features of the strategy. These divisions illustrate the role of energy for the BRI, as well as provide the foundations regarding the relationship between policy goals and implementation in South Asia in subsequent chapters.

4.1. BRI Development

The BRI was announced in 2013, launched in 2015 and enshrined in the Communist Party Constitution in 2017. Throughout the six years since announced, the BRI policy has been reactive towards the domestic and international context (Rolland 2017, 93). The eruption of various policy documents outlining numerous aspects of the initiative reflects this trend (see Appendix A for the initiative’s key documents and events).

Most significantly, the “Vision and Actions” document published in March 2015 demonstrated to the global community the components and aims of the BRI (NDRC 2015). It outlines its basic principles as: (1) respect for sovereignty, peaceful coexistence, and reciprocity; (2) open framework; (3) cooperation; (4) market-based; and (5) win-win relations. In implementing these ideals, ‘Phase I’ of the strategy has been the construction of roads, railways and ports (Ohashi 2018, 91).

Beijing’s drivers to develop the BRI can be viewed as economic, political and strategic. Economic to boost China’s economy, eliminate excess industrial capacity, stimulate global expansion of SOEs and to internationalize its currency (Rolland 2017, 94). Political to defend China’s sovereignty and territorial integrity and most significantly, to safeguard the continuation of Communist Party rule (Eisenman and Heginbotham, 225). Lastly, even though strategic drivers are not officially acknowledged, arguably Beijing has focused on limiting terrorist threats, increasing influence regionally, balancing against the US’ presence in Asia as well as safeguarding a stable supply of energy (Rolland 2017, 94). These drivers have shaped

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the BRI over time, with the most significant features being: (1) the context of the global economic and political landscape; (2) limits to China’s growth strategy; and (3) Xi Jinping’s presidency.

I. Global Economic and Political Context

The context of the global economic and political environment plays a significant role in the 2013 launch of the BRI. At the time, the Chinese economy was in the midst of recovering from the impact of the 2008-2009 global financial crisis, which stressed China’s dependence on the US for its export processing sectors (Demiryol 2019, 169). It also raised awareness and criticism against the neo-classical approach to economic prosperity for allowing the crisis to unfold, increasing the attractiveness for developing countries to adopt China’s model of development, termed the ‘China Model’ or ‘Beijing Consensus’ (S. Zhao 2010, 432). This development strategy contrasts to the Western ‘Washington Consensus’, which promotes neo-liberal policy prescriptions for economic reform as well as liberal democracy, focusing on balancing between free market and an authoritarian state in order to achieve both economic development and political stability (ibid., 419-429).

Additionally, in the years following the crisis, the US announced its regional security strategy the ‘Pivot to Asia’, as well as the Trans Pacific Partnership (TPP), which excluded China (Smith 2018, 7). This push towards Asia from the US was further advanced in September 2011, following the withdrawal of the US from Afghanistan and its engagement in the stabilizing efforts in Central Asia, termed by Secretary of State Hillary Clinton as the US’ ‘New Silk Road Initiative’ (Ohashi 2018, 90). These strategies of expanding Washington’s regional outreach provided significant incentives for Beijing to increase its regional and global presence (Zhang, Alon and Lattemann 2018, 27-28).

More recently, with the leave from the British from the European Union in the so-called

Brexit, as well as the Trump Administration’s advance of protectionism and isolationism, have

altered China’s perception towards the West, and incentivized China to advance its own model of economic and political development (Ohashi 2018, 90; Zhang, Alon and Lattemann 2018, 1). This change to SFA compromized of seeking new markets, promoting the internationalization of the RMB and avoiding dependence on the US dollar (USD) (Ohashi 2018, 93). In doing so, China’s economic diplomacy has shifted from bilateral to multilateral relations (Ohashi 2018, 87). With the BRI being embedded multilateralism, concerning a partial commitment to a multipolar international system (Zhang, Alon and Lattemann 2018, 24)

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Therefore, the relative weakening of the US-centric global economic order provides a platform for Beijing to increasingly advance an international hierarchy that subscribes to and incorporates Chinese interests. In the BRI, multilateral regimes of trade and currency are developed in pursuit of this aim, expanding Beijing’s influence in formulating new international norms and rules (Ohashi 2018, 88).

II. Managing China’s Economy

The current model of export-oriented growth and attracting FDI that caused an initial economic boom when opening-up to market forces in the late 1970s, is increasingly showing limited returns (Demiryol 2019, 168). Therefore, in order to safeguard growth rates and domestic stability, China has attempted to transition from an export-led to a consumption-led model of development, one that strives to alter production factors of its current economic landscape domestically, and abroad (Ohashi 2018, 86). However, by reorienting its economy to consumer-led growth, the neighboring foreign markets are required to be matured in order to increase their demand for the surplus supply. By developing international grids nurtures the demand for various energy technologies, such as solar panels, an industry in which China excels (Cornell 2019).

This coincided with decades of export-led economic growth motivated by the state through cheap lending, which led to large excess industrial capacity. After the financial recession, Beijing adopted a Keynesian approach to its economy, including the construction of large infrastructure in the last decade (ibid.).

The BRI focuses on connectivity, and effectively reorganizes economic space through the linking of markets and controlling global value chains. In doing so, the BRI allocates excess capacity to the most effective destinations (Demiryol 2019, 170). It offers a platform for Chinese industry to export the excess capacity produced, most predominantly in steel and cement, and further develop infrastructure abroad (Ohashi 2018, 93).

Nevertheless, Chinese officials deny that overcapacity is an aspect of the BRI and portray it as global industrial cooperation. They view the exporting of supplies as gifts for countries in need of infrastructure or energy, combined with China’s own construction experience (Rolland 2017, 100).

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III. Xi Jinping’s Presidency and the China Dream

The BRI is to a great extent ideologically shaped by Xi Jinping’s distinctive foreign policy approach. When rising to power in 2012, Xi revised Deng Xiaoping’s policy of ‘Keeping a Low Profile’ (KLP) which had come to define China’s foreign policy for the late 20th_{and early 21}st

Century, towards a proactive stance of SFA (Demiryol 2019, 168; Ohashi 2018, 87). The “Road to Revival” speech held at the National Museum of China on November 29th_{2012 exemplified}

what SFA entails, with Xi emphasizing China’s legacy of falling victim to western imperialism in the late 19th and early 20th Century, known as the ‘Century of Humiliation’. In order to overcome this victimized historical narrative, Xi argued for ‘national rejuvenation’ with China advancing greater responsibilities and engagement in the international system, termed as the ‘China Dream’ (Zhang, Alon and Lattemann 2018, 19-20). The BRI is a manifestation of this dream, which resonates China’s desire to acquire its ‘rightful’ place in the international order and deepen its commitment to global governance (Ohashi 2018, 86). Xi has called out for a restructuring of the Eurocentric nature of the international system and new relations between great powers in order to further gain global status (Zhang, Alon and Lattemann 2018, 23). This could be seen at the 2017 World Economic Forum in Davos, where Xi sought out a role of global leadership and defended economic globalization (ibid., 22). In June 2018, at the Central Work Conference of Foreign Affairs, which develops the narrative of Chinese policy, Xi stressed the importance of national sovereignty, security and development interests in order to actively engage in global governance with Chinese characteristics (Ohashi 2018, 100). Therefore, China’s BRI foreign policy has been shaped to proactively engage with the international community in a way that it will secure and maximize China’s national interests, wealth and power within the existing system (Zhang, Alon and Lattemann 2018, 20).

4.1.1. BRI Financial Institutions

In promoting the China model through the BRI, Beijing aims to provide one trillion USD in infrastructural investment to recipient BRI countries (Dreher, et al. 2017, 1). In order to fund this ambitions plan, various financial institutions have been altered or formed. The most significant are the China Development Bank (CDB); China Exim Bank; Agricultural Development Bank of China (ABC); Industrial and Commercial Bank of China (ICBC); Bank of China (BOC); Silk Road Fund (SRF); China Construction Bank (CCB); New Development Bank (NDB); China Export and Credit Insurance Corporation; and the Asia Infrastructure Investment Bank (AIIB) (OECD 2018, 18-19).

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The state-owned commercial banks ABC, BOC, CCB and ICBC, as well as the CDB and China Exim Bank, are the leading banks in financing the BRI projects. These banks have had experience in financing both domestic infrastructural projects – based on the rapid development of the nation – as well as abroad due to the promotion of the “Go Global” strategy adopted in 2001 (Zhou, et al. 2018, 9). This strategy encourages financial institutions to invest abroad, allowing China’s Overseas FDI flows to accelerate and become the second highest globally (ibid.). Where even though there has been an overall drop in Chinese OFDI since 2017, the outward investment towards BRI countries specifically has been expanding in large figures (ibid., 26).

The financial institutions of the SRF and the AIIB play the largest role in the provision of financial loans to recipient BRI countries. The SRF is an equity investment fund created for 40 billion USD in order to finance infrastructure and industry. It complements the financing of the banks and serves as a sovereign wealth fund (Das 2017, 127). The AIIB, established in January 2016, was the first international finance institution developed and led by China, and focuses on the regional allocation of capital towards BRI projects, ranging from infrastructure to energy (Ohashi 2018, 92; HKTDC 2019b).

4.2. China’s Energy Mix and Policy

Since the late 1990s, China has recognized the significance of safeguarding energy security in order to foster economic growth (Gopal, et al. 2018). This was shown in the ‘going out and bringing-in’ economic policy introduced at the time. The strategy aimed to motivate Chinese companies to invest abroad as well as to attract FDI domestically towards, among other things, China’s energy infrastructure. Aiming to develop, most prominently bilateral, international energy relations (Yu 2019, 248-249).

The 2012 Energy Policy states that China should show simultaneous consideration to both domestic and international energy development, mature channels and forms of international cooperation, and enhance its ability to go global. The Policy aims to guide the establishment of a new international energy order that promotes mutual beneficial cooperation (State Council PRC 2012). It also promises that China will actively engage in global energy cooperation, including energy resources as well as local and global environments and health. The policy shows China’s energy strategy trends that have evolved from bilateral to multilateralism,

Energy, Connectivity and Influence: China’s Belt and Road Energy Strategy Pursued in South Asia