In the space of less than a generation, China has transformed itself from a nation almost completely cut off from the international markets to an economic superpower. China’s tremendous growth has catalyzed a huge energy demand to sustain the rapid rate of development. In 2013, China spent more on oil than the United States. By 2020, China will be spending $500 billion each year on crude oil imports— almost five times its current defense budget. With limited domestic resources, China has turned to foreign coasts to keep its insatiable thirst for oil at bay.
China has extended its economic reach to a range of nations, including Venezuela, Kazakhstan and Iran. It has also developed alliances extensively throughout Africa, where oil and gas are plentiful, countries are eager for investment and political instability abounds. Peace is fragile in many of these countries, which are often led by regimes that Western governments deem unfit to trade with. For China, this brings an unfamiliar set of foreign policy demands, responsibilities and opportunities.
Historically, China has upheld a staunch noninterference policy in the internal affairs of other countries. Respect for the sanctity of sovereignty has often been used as a justification for its international political actions — or rather, inactions. This has had to change, however, in the search for black gold. China’s trading partners often lack developed infrastructure and face domestic security problems. The insecurity in these nations poses a constant risk to Chinese assets as they move within these countries, making it difficult for China to sustain its nonintervention policy. While China’s official rhetoric on apolitical investment has not changed, the powerful nation has adapted its formerly hands-off approach to protect its economic interests.
The government of former President Hu Jintao adopted a globalized strategy to address China’s domestic oil shortage. This included offering financial, political and diplomatic support to national oil companies to secure foreign supplies of oil for China’s domestic use. Backed by cheap or even free credit from the country’s state-owned banks, oil companies such as the China National Petroleum Corporation (C.N.P.C.) began to drastically expand exploration, production and distribution within China’s borders. Meanwhile, the China National Offshore Oil Corporation acquired assets and petroleum-related companies around the world to supplement domestic supply. By 2011, these national oil companies had operations in over 30 countries in five continents. While these majority state-owned companies are not fully government agencies, they have been critical in extending China’s reach and securing its national interests. Because they are subsidized, these companies are less concerned with profitability than with the stability of their supply. Their state-mitigated risk allows these oil firms to focus on their alternate mandate as agents of China’s global energy policy.
As the world’s second-largest economy, China’s foreign engagement is hugely important in shaping international politics. Accordingly, they are beginning to act more like a global superpower and have become progressively less agnostic when it comes to other nations’ internal affairs. As China continues to extend its reach, there is unprecedented opportunity for it to develop complementary approaches with the United States in support of peace. These two behemoths share a common vested interest in stability and could work together to achieve this. But the two countries approach strategic decision-making from very different perspectives. As a developing nation, China is necessarily more resource-driven than even the United States. China’s hegemony is goal-oriented, while the United States has the luxury of exerting softer power on the world stage.
To sustain its model of investment in oil-rich but high-risk investment sites, China has prioritized relations with host governments. This strategy often manifests itself as support for incumbent regimes, regardless of local preferences or attempts by Western states to isolate authoritarian leaders. By offering these states financial aid and diplomatic cover in bodies such as the U.N. Security Council in return for privileged access to oil assets and supply rights, China has used its leverage to help states resist Western pressures like economic sanctions and diplomatic isolation. All this does not mean that China doesn’t value peace. It has gone to great lengths to help secure the governments of partner countries and has built up infrastructure to increase social and political stability. But in terms of the balance between sustainability and democracy, China leans much farther than the West towards the former.
Although China’s involvement is essentially about securing markets, it is also compelled to a politically competitive tango with the West. Every step China takes is closely monitored by the United States. While Chinese calls for the protection of human rights are quiet and inconsistent at best, the rise of China in these scattered regions has shown that purely strategic calculations may be improving stability — albeit in lots of places where people want change.
The trials and tribulations with the Sudanese have brought to light several elements of China’s new, holistic approach to its international oil endeavors. China is Sudan’s largest foreign investor, purchasing about two-thirds of Sudanese oil. It has invested about $5 billion in oil field development and has helped build a pipeline from South Sudan to the Red Sea as well as a refinery near Khartoum, Sudan’s capital. The Chinese also own a large stake in the consortiums that pump out most of Sudan’s oil and hold 95 percent of the rights in a drilling area that straddles the troubled region of Darfur. Sudanese production of oil has risen from about 60,000 barrels per day in 1999 to more than 500,000 in 2006 — mostly due to Chinese investment. This has raised the stakes for both countries: Sudan is now economically dependent on China’s thirst for oil, and China has thrown billions of dollars of capital into a region gripped by a new wave of violence.
The end of the Second Sudanese Civil War, which culminated in the secession of the South in 2011, has not entirely resolved the crucial economic disputes that spurred the separation. Both Sudan and South Sudan are reliant on oil revenues, which account for 98 percent of South Sudan’s budget. While the majority of the oil lies in the South, all of the pipelines run north. The two nations have fiercely disagreed over how to divide the oil wealth of the formerly united state. China’s weight as an investor in South Sudan gives it extra leverage in the negotiations and a method for diffusing some of the remaining tension.
Sudanese oil motivated Chinese investment in, and the pursuit of close relations with, Khartoum long before the secession of the South. During the civil war, China maintained its ties with the North, but also worked to establish links with the nascent government that was developing in the Southern capital of Juba. It was one of the first countries to establish a consulate general there, which became an embassy after the South’s independence. Because China had been a major arms supplier to the Northern government during the war, many Southerners were angered that their government made lucrative deals with the Chinese after the conflict. This was not enough to sever ties, however, as China correspondingly adjusted its policy to improve its strained relations with Southerners. Since then, Beijing has invited numerous high-level Southern officials to China, including current President Salva Kiir, and has promised to invest heavily in South Sudan. Though China’s move towards increased diplomacy with the South was designed to secure oil investments upon South Sudan’s independence, this has also allowed China to become a mediator between the two sides.
Despite this delicate diplomatic maneuvering, China’s interests remain at risk due to numerous unresolved disagreements between the North and the South. In one such dispute, the two sides disagreed on the price for using the North’s pipelines. While Juba operated most of the oil fields, Khartoum controlled all of the facilities for exporting crude oil. The inability to reach an agreement resulted in Juba’s decision in January 2012 to shut down all production in the South. China worked quietly behind the scenes with other interested parties, especially the African Union High Level Implementation Panel, to end the deadlock. Juba and Khartoum finally agreed in August 2012 on a package deal whereby Juba will reimburse Khartoum much less than originally demanded for use of the pipelines and will provide $3 billion in financial assistance to the North. As production in the two African countries resumed, China reduced the level of imports from both nations.
China wasn’t the only country involved in the region. The United States worked with South Sudan to see their separatist aspirations come to fruition, while China played both sides, working with both the Southern and Northern Sudanese governments to secure peace. However, China’s efforts in the region came to benefit the United States as well — China’s finesse and willingness to work closely with both sides kept the oil running throughout the crisis, an outcome ultimately appreciated by the United States, with its large investments in the international oil market.
Yet China’s mediation did not establish sustainability, as the conflict was ignited again in late 2013. Oil production dropped by about a fifth, and more than 300 C.N.P.C. workers have since been evacuated. The unrest in South Sudan, which has left more than 1,000 people dead, has prompted China to demand a cessation of hostilities and violence. China has taken an active role in Ethiopian-led mediation efforts and urged international powers to do the same. Foreign Minister Wang Yi made it clear that China wanted both sides to stop fighting and seek a reasonable and rational way out, and was even willing to mediate personally between the warring sides. This response highlights China’s increased willingness to use its political weight in order to protect its assets. Chinese officials have met with rebel and government delegations to discuss the terms of peace, but have simultaneously pursued separate talks with Sudan in order to deploy a joint military force to protect vital oil fields from rebels. For now, however, China is unwilling to move forwards on business contracts until the fighting stops.
While diplomatic ties and official relations among the nations’ leaders are strong, it is more difficult to take the pulse of local opinions of Chinese investment. In 2012, 29 Chinese construction workers were abducted in South Kordofan and were released 11 days later, after intense negotiations. The Sudanese rebels were quoted as saying that they did not want to harm the workers, but instead aimed to send a signal to the Chinese government that they did not want it to be involved in the conflict over Sudanese oil. Such evidence isn’t as indicative of national sentiment as poll data might be, but it certainly points to Sudanese discomfort with the extent of Chinese influence. Some Sudanese resent the perceived self-interest at the heart of China’s efforts to mitigate the conflict.
Oil motivates China to keep the peace, but that may sometimes come at the cost of backing unpopular leaders. In Sudan, United States and Chinese interests overlapped to mutual acclaim, but this is not always the case. China’s focus on stability has put it at odds with the West in Libya, where the country supported Gadhafi throughout the Arab Spring, largely due to China’s oil-related needs. Before the uprising in February 2011, China had outstanding contracts in the region that were worth about $20 billion, and its Libyan oil projects employed 36,000 Chinese workers at their peak. The deserted worksites that litter the Libyan landscape demonstrate the massive cost of violence in the region for China.
Because of the country’s well-documented long-term relationship with Gadhafi, China was originally reluctant to support Libya’s rebels when they asked the international community to intervene militarily in March. China abstained from a Security Council resolution authorizing “all necessary measures” to protect civilians. Later that month, Chinese President Hu Jintao told French President Nicolas Sarkozy that he should “give peace a chance” and favor diplomacy over NATO-led missile strikes. Official Chinese media outlets described the revolution as a “foreign military intervention” that led to “war and chaos.” Chinese correspondents were reportedly prohibited from using the word “revolution” in their dispatches from Libya. It was also revealed that Gadhafi’s officials had traveled to Beijing in July 2011 and met with representatives of state-controlled arms manufacturers, who were prepared to violate the U.N. arms embargo imposed on Libya and sell Gadhafi $200 million worth of weapons and ammunition.
In Sudan, China was quick to pick both winning sides, and ultimately made similar choices in Libya. Originally, China aligned itself with Gadhafi, refusing to support the rebels. But as the civil war went on and Gadhafi’s chances slimmed, China started building an alliance with the insurgents and moving to the Western side of the conflict. It initiated contact with the rebels’ interim government — known as the National Transitional Council — as a first step in a plan to protect Chinese oil assets. Rapidly shifting its alliance after Gadhafi’s death, China embraced Libya’s new government and updated the references to the former leader in state media, depicting Gadhafi as a madman whose time ran out, rather than a strongman who defied the West. Towards the end of the conflict, China’s Foreign Ministry called for the rapid launch of an inclusive political process and economic reconstruction in Libya.
China’s political-economic strategy of befriending convenient leaders has come to a comparable loggerhead with the West elsewhere, notably in its relationship with Venezuela. However, while it seems that Beijing has bitten the bullet and reconfigured its policies in Libya to support the rebels, it has been slower to shift away from the still-standing strongmen in Caracas. Since 2007, the China Development Bank has lent Venezuela $42.5 billion, collateralized by revenue from the world’s largest oil reserves. This is more than the $29 billion that the United States spent rebuilding Iraq between 2003 and 2006. Numerous deals in the past years have also established funds to provide capital for infrastructure projects and oil field development in the country — all, in turn, for repayment in oil from Venezuelan wells. In November 2013, Venezuela was reported to export 640,000 barrels a day to China, about 310,000 of which were used to pay back loans.
The loans effectively cemented Chinese influence over former Venezuelan President Hugo Chávez, who regularly spoke of recovering Venezuela’s sovereignty after decades of subjugation by the U.S. empire. Ironically, Chávez’s legacy is not Venezuelan independence, but an increased dependence on the Chinese to counterbalance dependence on the West. Those loans, in addition to securing large deliveries of oil, have returned in the form of contracts with Chinese state-run companies. These conglomerates gained stakes in Venezuela’s oil industry after American businesses abandoned the country under the threat of nationalization. In the wake of this Western exodus, the mismanagement of the government petroleum company, Petroleos de Venezuela, has made Chinese investment even more necessary.
Venezuela has historically used much of China’s investment in order to fund lavish social spending — a practice which Chávez’s political heir, Nicolás Maduro, has continued. In December 2013, Maduro announced that he had closed a deal for $5 billion in credit from China that he would use for the development of welfare schemes. However, the cost of these projects goes beyond their nominal price tags. Years of populist mismanagement has left Venezuela with a looming currency crisis, massive inflation, corruption and inefficiency. All of this should be of concern to the Chinese government as it invests, since it makes Venezuela almost as economically unreliable as Libya and Sudan.
Chronic goods shortages, a poor economy and rising crime in Venezuela brought people to the street demanding action. In February, a series of antigovernment protests forced the country to a halt. Chinese Foreign Ministry spokeswoman Hua Chunying noted that the Venezuelan handling of the riots underscored China’s confidence in the government’s ability to protect national stability, which it determined to be in the fundamental interest of the Venezuelan people. Nevertheless, China has already decreased its financial assistance to the region because of the high inflation rates, a fact that has only exacerbated economic instability — and the riots. As China pulls its currency out of Venezuela, it may be learning, yet again, that there is potential for great harm in its high-risk investment strategies.
There are obvious economic consequences to the Chinese risk game: The state-owned C.N.P.C. declared in early 2013 that unrest in countries such as Sudan, South Sudan and Syria cost it the equivalent of 15 million metric tons of oil in 2012. But the implications of China’s global strategy to pursue oil abroad — specifically in unstable and conflict-ridden regions — are also an imperative consideration for Western policymakers.
As one Western official admitted, “It’s like we operate in parallel universes: they do what they do, we do what we do.” Although different values and principles exist, a shared interest in stability represents a concrete foundation for cooperation. As Beijing’s approach towards conflict-affected countries evolves to protect deepening interests, there’s an unprecedented opportunity for China and the West to develop more complementary approaches in support of peace and stability.
Chinese and Western policymakers need to create avenues for dialogue at multiple levels. This must include not only officials, but also think tanks, academics and NGOs. The precise meaning and implications of a stability-oriented strategy, and how best to promote it overseas, must be discussed. Small, practical, on-the-ground development projects ought to be jointly supported in countries affected by conflict, serving as possible entry points for more productive cooperation. The collaborative work that the two superpowers have done regarding North Korea’s nuclear arsenal is a testament to the possibility of sustained Sino-American compromise. China’s strategy in Sudan, Venezuela and Libya has ultimately coincided with U.S. interests, showing that even when the tempting presence of oil is involved, outright conflict between China and the United States can be avoided.
For its part, China would be better off if its rise were perceived as peaceful. Its image as a global power will be greatly determined by the role it adopts in parts of the world that are troubled by conflict, so Beijing needs to recognize the consequences of its engagement and act accordingly. This may mean reassessing its commitment to noninterference. As Chinese policymakers grapple with how to square their newfound influence and responsibility, they may well find that the most self-serving solution is still a joint one.