As China, U.S. Vie for More Oil, Diplomatic Friction May Follow

Think of next week's meeting between President Bush and China's President Hu Jintao as a summit of the planet's most voracious energy user and the planet's fastest-growing energy user. In a world of limited oil resources, that could strain U.S.-China relations as much as any issue.

China's oil industry has wooed countries that the United States has tried to isolate for political reasons -- such as Sudan, Iran and Burma -- potentially undermining the isolation efforts. Three of China's major oil companies have been aggressively pursuing long-term supply arrangements in such places as Venezuela, Nigeria, Gabon and Angola.

Even Saudi Arabia, despite its long-standing tight relationship with U.S. oil companies, is turning toward China and is today its largest oil supplier. In 2004, China Petroleum & Chemical Corp., also known as Sinopec, became one of just five companies to win the right to explore for natural gas in the uninviting desert known as the Empty Quarter, edging out U.S. companies interested in the area. The kingdom has invested in Chinese refinery projects, and in January, Saudi King Abdullah bin Abdul Aziz visited Hu in Beijing.

"Saudi Arabia is taking a Chinese wife," said Charles W. Freeman Jr., a former U.S. ambassador to Saudi Arabia who has extensive diplomatic experience in China. "The Saudis are not divorcing us. In Islam you can have more than one wife and they can manage that."

But can the United States? Many U.S. policymakers are nervous about China's quest for energy supplies around the world.

"I can tell you that nothing has really taken me aback more as secretary of state than the way that the politics of energy is -- I will use the word 'warping' -- diplomacy around the world," said Secretary of State Condoleezza Rice in testimony before the Senate Foreign Relations Committee on April 5. "It is sending some states that are growing very rapidly in an all-out search for energy -- states like China, states like India -- that is, really sending them into parts of the world where they've not been seen before, and challenging, I think, for our diplomacy."

And China is nervous about the United States, too. The vociferous opposition in Congress last summer to the China National Offshore Oil Co.'s bid to buy Unocal Corp. has left sore feelings in China, according to Xiao Lian, director of the Center for American Economic Studies at the Chinese Academy of Social Sciences. Xiao said Chinese military strategists also worry that the United States might try to block oil supplies in a dust-up over Taiwan, the self-governing island that Beijing claims is part of China.

According to Jiang Wenran, a professor at the University of Alberta, a popular Chinese online book, "The Battle in Protecting Key Oil Routes," imagines a sea engagement near the Strait of Malacca linking the Indian and Pacific oceans, in which the Chinese navy destroys an entire U.S. Pacific carrier group.

"The risk is that energy issues become not a source of constructive cooperation but rather a deepening source of competition, misperceptions and excuses for obstructing one another's interests," says a paper by Mikkal Herberg, an energy security expert at the National Bureau of Asian Research, and Kenneth Lieberthal, who served as the senior director for Asia on President Bill Clinton's National Security Council.

Next week's talks between Bush and Hu should provide an opportunity to see whether it will be cooperation or not when the two discuss Sudan and Iran. In conversations with the Chinese, Deputy Secretary of State Robert B. Zoellick has tried to use China's interest in energy to win its support for tougher action on Iran's nuclear program, according to a senior administration official. Zoellick has made the case to the Chinese that if Iran obtains a nuclear weapon, it would be destabilizing in the region that is the source of much of China's oil -- and thus it was in their interest to prevent that from happening.

The dynamics are sobering. Over the next 15 years, the number of automobiles in China is expected to increase fivefold, helping to double China's overall demand for oil, which has already passed Japan's to become the second-largest in the world. By 2020, China is expected to import 70 percent of its oil needs, compared with 40 percent today.

Meanwhile, the growth in U.S. oil consumption, starting from a higher base, rivals China's growth when measured in barrels a day instead of percentages. From 1995 to 2004, U.S. oil imports grew by 3.9 million barrels a day while China's grew by 2.8 million barrels a day, thus "making the United States much more of a rogue element than China in the world oil market over the past decade," Herberg and Lieberthal wrote.