Tuesday, May 10, 2005

The Second Cold War

There is a story about a Chinese wish, which carries the danger for the wisher that, when it comes true, may turn out to be a nightmare instead. For centuries, the western business dream of trading with China has been expressed in the wish of "if only every Chinaman buys a bottle of oil for his lamp."

Today, that wish has come true, literally. And the USA has found out that, true to the oracle on the nature of the Chinese wish, it has been, and will continue to be a nightmare.

An industrially awoken China for the past couple of decades or more has worked very hard to be the new emerging economic powerhouse of the world. In fact, her economic activity is reputed to be what has been holding the global commerce intact for several years. This is a tribute to her new economic might, and mind you, she hasn't even gained full potential as yet. Due to the expanding and intense business, commercial and industrial activities, China is a very thirsty nation, but not for Coca Cola.

China needs fuel of all sorts, particularly oil. For the Chinese economic juggernaut to continue on its high speed course, she must secure the fuels, at any cost. And China has been doing that, but with a smile and many RMBs, rather than with the military aggression of shock and awe.

She knows that her principal competitor for purchase of oil, control of its assured supply and strategic domination of energy rich (oil and other fossil fuel) resources is the USA, who is currently the world's biggest consumer of oil, but to China, not for long.

China has already overtaken Japan's No 2 position in the list of oil guzzlers, and is gradually but steadily catching up with America.

In the short to medium terms China can't and doesn't expect to surpass the USA in military superiority, so she applies instead 'silken' diplomacy. Her envoys in Armani suits and Rolex watches smile their way into Venezuela where an anti-USA Hugo Chavez has been more than delighted to sell to the Chinese, at a price of his own choosing too. China is more prepared to pay a higher price than the USA because of her low labour cost and higher productivity.

Already, there is talk of an oil pipeline from Venezuela through Colombia westward to the Pacific coast of South America, to facilitate supply of oil to China.

China hasn't stopped there. She has secured oil deals in Sudan, signed a humungous US$100 billion gas deal with Iran, US$3.5 billion Kazakhstan-China oil pipeline, other fuel contracts with the neighbouring 'stan' nations. Undoubtedly Iraq must be also within her sight, very much to the USA's consternation. That might have been the reason for the Bush Administration to use money, diplomacy and behind-the-scene forceful persuasion to place Ahmad Chalabi in the new Iraqi cabinet as acting Oil Minister, but then, for how long?

China has signed a multi-billion long term contract with Australia for the supply of gas, and purchased and invested in multi-billion dollar deals in Indonesia's energy sector.

Its excellent relationship with Myanmar puts her ahead of the USA and European competitors for any discovered oil there. I am sure we may expect Chinese generous overtures for long term contracts for Malaysia's oil and gas. There are even rumours that the age-old dream of the Kra Isthmus canal or an oil pipeline across the isthmus may be sponsored and financed by a thirsty China, who doesn't trust the vulnerability of the Malacca Straits because of both potential terrorist activity and the US recent interest in the narrow sealane.

Forget the lies about WMD, al Qaeda links or even 'regime change'. The USA invaded Iraq because of fear of losing control of the oil produced in the Middle-East to competitors, chief among whom would be China. Prior to the invasion, Chinese technicians were in Iraq laying optic fiber cables for Saddam Hussein's government, which the US accused would improve Iraqi air defense. But the US was more worried of the trade relationship.

The Chinese growing presence in the oil rich Middle-Eastern nations would have convinced the Americans that its previous strategy of allowing a Saddam Hussein to control the buffer state of Iraq, between hostile but oil-rich Shiite Iran and oil-rich Sunni Saudi Arabia, was no longer viable. The Americans are also frantic about China's hugh purchases of oil in Iran and the regional nations. Recently it warned an equally thirsty India not to go ahead with a gas line from Iran through Pakistan to the sub continent, on the pretext that India shouldn't break an American sanction on Iran because of her nuclear programme. That explanation sounded rather hollow considering the USA tolerates a nuclear irresponsible Pakistan next door. The truth is the US doesn't like the idea of Iran's energy resources being channelled in a permanent manner to other nations like India or China.

The USA is identifying resource-rich regions, delivery routes, choke points like the Malacca Straits, and the countries that it can marshal on to its side, all to contain China and her Thor-like frightening thirst, and perhaps even India, a soon-to-be oil-thirsty nation.

The second Cold War had started without our notice because it moved onto the world stage on oil-greased hinges. This time the global conflict is over black gold rather than political ideology. The battle lines are drawn. The USA, Japan and any nation the Americans can 'recruit' to encircle China on one side, and China and possibly India on the other.

"If only every Chinaman buys a bottle of oil for his lamp."

No comments:

Post a comment