1. China Energy Security Strategy and Implications to US National Security
Stephen Alexander

2. China’s Economy
China’s Energy Demands
China’s Energy Security Strategy
Implications to China’s Approach
Implications to US National Security
COAs
Questions

3. Economy Financial explosion since economic reforms in early 1980s
GDP growth between 7 and 14 percent over last twenty years
Expect 9 percent growth over next few years
Second largest economy in world
Per capita GDP tripled in
last 8 years

4. Energy Demands Late arrival to global energy market
Isolation policy from 1950s – 1980s & sufficient domestic energy reserves
Net exporter until 1993
Now second largest importer
Increased per capita GDP equals hundreds of millions move to middle class over next decades
Increase in industrialization, urbanization, & transportation
The Middle East remains the largest source of China's crude oil imports, In 2011, the Middle East supplied 2.6 million bbl/d (51 percent).

5. Energy Security Strategy
Non-competitive approach
Three area focus:
Buy on open market from standard sources i.e. Saudi Arabia & Iraq
Invest in existing oil producing countries to increase production and secure sources i.e. Venezuela & Kazakhstan
Develop non-oil producing countries with proven reserves i.e. Sudan
Prefer bilateral contracting approach to ensure physical
control of oil at its source
Capital investments:
Infrastructure-for-oil loans
Oil-for-loans
Rents to governments
Special trade deals:
Military weapons
Nuclear technology

6. Implications to the Non-Competitive Approach
China wanted to minimize its dependence on markets that are vulnerable to geopolitical leverage from the US
It has sought out countries that are not major exports to US and in some cases maximized US diplomatic issues with oil producing countries to its advantage (i.e. Saudi Arabia & Venezuela)
Securing oil in high
risk countries (i.e. Sudan,
Congo & Angola)
During the 1970s – 1990s heavy the US had heavy reliance on oil imported from the Persian Gulf

7. Implications to China’s Approach
Positive:
Developing energy sources in high risk areas brings energy to the market that would otherwise be ignored
China securing energy from these sources minimizes its large demand on traditional sources thus keeping global prices competitive
Investing in existing oil producing countries increases overall production and global energy supply
Negative:
High risk countries weren’t previously developed for a reason, instability or conflict can affect energy movement and thus indirectly affect global energy sources
Securing undeveloped energy sources in contested areas such as South China Sea and Senkaku Islands increase tension
Securing energy from State Sponsor’s of Terror finances political agendas that are counter to basic human & political rights

8. Implications to US National Security
The introduction of new high risk energy sources brings indirect risk to the broader global energy market
Impact to energy output due to conflict will be felt on the broader global energy market
Chinese capital flowing into corrupt countries has the potential to create instability and conflict in and around the country
Sudan, Congo, Angola corruption
Venezuela, anti-American agenda in Central/South America
Iran state sponsor of terror
Increased importance of developing local sources will result in increased tension and potential conflict in contested areas like Senkaku, Spratly and Parcel islands

9. US COA to Minimize Impacts
Open dialogue with China on energy security and implications to both their domestic needs as well as global implication
In China’s Energy Policy 2012 white paper, it states that “strengthening dialogue and communication among energy exporting, consuming and transiting countries is the foundation of international energy cooperation
US has been in the Oil market much longer than China. The US can share its success and failures to assist China in avoiding similar mistakes
Promote increased share of burden securing sea lines of communication
Half of the China’s “GDP depends on sea lanes.” More than “75 percent of China’s oil imports” come through the Malacca strait and the South China Sea
Decrease in over US global military footprint
Increase cooperation with China on development of new technology and renewable energy
2005/09 China passed Renewable Energy Promotion Law
Aligns with US focus on renewable energy usage
The collective ability of both countries knowledge base can expedite research and development and bring new technologies to market faster
More importantly, these new technologies and renewable energy sources will minimize each countries dependence on foreign energy sources thus minimizing broader national security issues associated to energy

10. Questions?

11. BACK UP SLIDES

12. China’s Oil Reserves

13. South China Sea Importance