Libyan Strife Exposes China’s Risks In Global Quest For Oil

After the outbreak of violence in , the Chinese government made a big show of evacuating nearly 36000 Chinese nationals working in the country. This Libyan incident may force China to reconsider its strategies for procuring from potentially unstable Middle-Eastern and African countries. From the Los Angeles Times:

Beijing’s leaders “saw themselves as the leader of the Third World, the anti-imperialists, the anti-hegemonists. They felt that way right up until the time they had to evacuate everyone from Libya,” said Amy Myers Jaffe, an energy analyst at Rice University’s Baker Institute. “They have suddenly realized that there are political risks in energy equity markets and that they have to make much more sophisticated risk assessments.”

Before the Libyan conflict erupted, about 75 Chinese firms reportedly were laboring on an estimated $18 billion worth of contracts there, including construction of rail lines, irrigation systems, and Internet and cellphone networks.

But China’s primary interest is energy. State-owned China National Petroleum Corp. has partnered with Libya’s national oil company to build hundreds of miles of pipeline and explore for oil and gas offshore.
“China has made huge diplomatic and economic investments in these countries,” said Shi Yinhong, a professor of international relations at Remin University of China. “Now suddenly, you’re seeing the inherent risk in doing that. China has been focused on the economic benefits. They should learn from this and consider the social and political sides more.”

Energy conservation and energy-related issues have dominated the Chinese political agenda, most recently in China’s new Five Year Plan. From the New York Times:

The report [a draft of the Five Year Plan] pledges to further reduce energy consumption per unit of G.D.P. by 16 percent, and carbon dioxide emissions per unit by 17 percent. And for the first time, the state-run Xinhua news agency reported, the government will place a cap on total energy use, limiting consumption to the equivalent of four billion tons of coal by 2015.

The government also promised to build “well-equipped statistical and monitoring systems” to gauge greenhouse gas emissions, accelerate construction of sewage treatment plants, retrofit coal-fired power plants with pollution controls and continue a pilot program to develop low-carbon cities.

How China handles its growing energy demands will be an increasingly important topic in coming years.

March 9, 2011, 7:48 PM
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