Pierre noel2

China’s energy security

31 May 2011

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China’s energy security rests on the functioning of global energy markets, whose security is predominantly carried out by America – what effect …

Dr Pierre NoëlChina’s energy security rests on the functioning of global energy markets, whose security is predominantly carried out by America – what effect has this on the American-China relationship?

Growth in energy consumption and imports of gas and oil are serving to raise Chinese anxiety around the security of its energy supplies and driving it closer to the United States to continue to policing energy security.

According to Dr Pierre Noël, Research Associate at Cambridge Judge Business School, America currently provides security for the global energy markets on which China relies.

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He says that China’s growth in oil consumption and imports does not in itself create problems for other consumers and importers because the commodity markets allocate oil supplies to whoever can pay.

China’s increased consumption has two effects. The first is to accelerate the exploration and production all over the world and also to drive up prices globally. The security problem stems from the global market for oil where there is no reliance on bilateral links with specific producers to cover demands.

Dr Noël, Director of the EPRG Energy Policy Forum, adds that security issues are primarily for the global market and the turmoil in the Middle East is good example.

“The Middle East problem is one of the two key issues that matter for the security of Chinese oil supplies. The other is one of security of the sea lanes – the oil transport corridor between the Middle East and East Asia.

“The oil security architecture which has prevented major oil supply disruption over the last 30 years was US-installed and US-maintained and is now collapsing before our eyes.

“US minimalist policy over the last decade has not helped and there were probably some deep forces eroding it anyway but the Iraq war was certainly the beginning of the end.

“The question in principle is, can that security be transferred from a US maintained architecture or regime to something that is more multilateral relying on regional powers and will China have a roll in any new security regime in the Middle East.”

Dr Noël says the issue over the sea-lanes is simpler. There is already military co-operation involving the US and China. Concerns about the build-up of Chinese military power are offset by confidence-building measures and actions that include the joint policing of naval sea-lanes.

“Things could wrong but, broadly speaking, the ability of China and the US to work together both in renewing the security regime in the Middle East and policing those sea-lanes are the two major drivers of China’s oil security both mid- and long-term.”

Although he’s ‘quite optimistic’ in terms of strictly defined energy security Dr Noël warns that Taiwan has the potential to derail the China-US relationship.

“Whether the two incumbent great powers and the rising great power will be able to coexist peacefully is not something that will be decided primarily by energy, but if the answer is ‘no’ then it will impact on everybody’s energy security starting with that of China.”