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[casi] Interesting!!Chinese analysis about China, Russia, US and OIL.

[ Presenting plain-text part of multi-format email ]

Hong Kong Ta Kung Pao in Chinese 12 Jan 2003

Article by Pang Changwei, associate professor at Department of Humane Studies and Social Sciences 
of Petroleum University (Beijing): "The

Triangular Energy Relationship Between China, Russia, and the United States"

[FBIS Translated Text]     After the "9/11" incident, the trend of political multipolarization in 
the world has met with obstruction and will experience frustrations and setbacks for a long time to 
come although the mainstream of peace and development remains unchanged.   As the US-led 
international war on terrorism continues, the most profound changes since the end of the Cold War 
are taking place in the relationship between big powers in the world and the international order. 
In the key energy regions of the world, the disposition of forces of big powers is overturning the 
old balance and is in the transition to a new structure of balance.

    The United States is performing the sword dance as a cover for its attempt on oil.   If the 
United States and Britain bypass the United Nations to launch a war on Iraq, this would mean the 
disintegration of the structure of international relationship built since World War II; and when 
the United States takes possession of the oil of Iraq, this would mean that it declares the 
establishment of the US "monopolar world of oil politics", OPEC will collapse, and it would be 
difficult to have a just force in the world to prevent the United States from using force at will. 
Russia, for the time being, is an "attendant" in the international counter-terror coalition.   Once 
the United States controls the oil of Iraq, it will gain a new and powerful leverage to impose 
pressure on Russian economy.

    New Posture of Energy Cooperation Between the United States and Russia

    The United States and EU are stepping up efforts to carry out cooperation with Russia in the 
energy resources of oil and gas, and the United States has already established a good foundation 
for cooperation with the former Soviet Union and the new Russia as well.   At present, while 
continuing to export 3 million barrels of crude oil to the traditional European market every day, 
Russia is making great efforts to explore the North American and East Asian markets.   Improvement 
in all aspects of the relationship between Russia and the West has opened up vast room for Russia 
to conduct energy diplomacy and will have an important impact on the formation of the pattern of 
Northeast Asia's energy supply and demand and China's strategy of "going out" for oil.

Russian-US energy dialogues will exert a subtle geopolitical and economic influence on the 
intensified Sino-Russian energy cooperation and their joint efforts to exploit the oil and gas 
resources in Siberia and the Far East region and to build transportation pipelines.

    After the "9/11" terrorist attack, the United States has included other important oil producing 
countries or regions, including Russia, West Africa, Caspian Sea, and Indonesia, in its strategy to 
promote diversification of its energy import.   The United States encourages the reform of Russia's 
energy departments, maintaining that further strengthening Russia's energy departments will help 
the United States acquire diverse sources of oil and natural gas supply it will need in the next 
few years and will then help reduce its increasing reliance on the Gulf area which is liable to get 
bogged down in turmoil due to the influence of the Palestinian-Israeli conflict and the US-led 
counter-terror efforts.   Russia is also willing to draw US funds into its oil and gas development. 
  Judging from a long-term viewpoint, this will help Russia hold back the active participation of 
the United States in the exploitation and exports of the energy resources in the Caspian Sea area 
and pave the way for balancing the geopolitical interests between Russia and the United States in 
the Caucasus-Caspian Sea-Central

Asia region.

    Russian Oil Attracts China and United States.

    After the "9/11" terrorist attack incident, thanks to Russian support for the US war on 
terrorism, Russia and the United States have accelerated their energy cooperation against the 
backdrop of the warmng up of their relationship.   Because the Palestinian-Israeli conflict has 
continued to escalate, Middle East situation has deteriorated, and the international oil price has 
fluctuated since April 2004, the United States has had disputes with the Arab world over the issue 
of using force against Iraq, reduced its trust in Saudi Arabia, its ally, and urgently looked for 
diverse sources of oil supply.   Russia, which abounds in oil and gas resources, has maintained the 
momentum of growth in oil output and become more forthright in competing with OPEC for a larger 
share in the world's oil market, thus making Russia a country needed by the other two countries in 
its new energy "triangular relationships" with the United States and OPEC and with the United 
States China.   While competing with OPEC for larger shares in US and European oil and gas markets, 
Russia has stepped up efforts to participate in the oil and gas exploitation in the Central 
Asia-Caspian Sea region and control the transmission pipelines.   While actively drawing in US 
funds and technology to develop the oil and gas fields in Siberia and the Far East region, Russia 
will not give up China, its energy export market with bright prospects, but the quality and range 
of Russian-US energy

cooperation will restrain the level of Sino-Russian cooperation in oil and gas exploitation, and 
Russia's energy diplomacy, for the first time, has risen to a favorable position where it can gain 
advantage either from China or from the United States in its triangular relationship with China and 
the United States.   Russia has taken advantage of the improvement in the Russian-US relationship 
and the increase of the world oil price to establish its position as a large oil exporter, contend 
for a larger share in the oil market, and challenge OPEC.   After the "9/11" terrorist attack, 
"Russia's oil has become more attractive to the United States than any time before."   When giving 
a speech to German business circles on 25 September 2001 during his visit to Germany, Russian 
President Vladimir Putin said that Russia would increase its oil export should oil supply encounter 
a threat.   He said, "When developed countries are keeping an intense watch on whether Middle East 
oil supply can be guaranteed, Russia has stood out as a new friend in need.   In addition to 
expressing support for the US military actions in Afghanistan, Russia will also contribute its oil 
fields so that Western countries may no longer rely on the turbulent Gulf area."   On the eve of 
Putin's US visit in November 2001, Rene Dahan, director of the US Exxon-Mobil Corporation, made an 
announcement on 30 October on a $12-billion investment project to be developed in Sakhalin, which 
will enable Russia to win $30 billion to $40 billion of investment in the next 30 years.   When 
answering reporters' questions in Washington on 13 November, Putin spoke highly of the Russian-US 
cooperation in the economic area.   In addition to the issue of strengthening counter-terror 
cooperation, the heads of state of Russia and the United States looked into other issues, such as 
Russia's entry into WTO, cancellation of the Jackson-Vanik Amendment, recognizing Russia as a 
country practicing the market economy, human rights, and religions.   Repaying the favor, Russia 
expressed willingness to contribute efforts to the international counter-terror struggle led by the 
United States.

    Gulf countries provided 22.8 percent of the oil imported by the United States in 2001.   
According to the data of the US Department of Energy, major oil exporters to the United States, 
listed in the descending order, are Canada (which provides 15.1 percent of the total volume 
imported by the United States), Saudi Arabia (14.7 percent), Venezuela (13.7 percent), Mexico (11.3 
percent), Nigeria (7.7 percent), Iraq (5.3 percent), Norway (3.2 percent), Angola (2.9 percent), 
Britain (2.7 percent), and Colombia (2.4 percent).   "New York Times" carried an

article "Russian Oil and US Security" in May 2002, which says Russia is an underappreciated oil 
source and the world's single largest non-OPEC exporter, with 10 percent of currently known oil 
reserves and 9 percent of world output.   However, Russian oil which the United States purchases 
occasionally accounts for a mere 1 percent of the US oil import, while in

2001, Iraqi oil accounted for 7 percent of the US oil import, and oil from Saudi Arabia, Venezuela, 
and Iraq combined accounted for 34 percent.   Reducing its reliance on the countries mentioned 
above may help the United States stabilize oil price and extricate itself from the unfavorable 
situation where it is liable to political threat.   The United States is not used to seeking help 
from Russia to ensure its energy security.   However, Russia's tremendous changes that took place 
in the past nearly 10 years and, in particular, the unity between Putin

and the United States after the "9/11" incident have consolidated the above-mentioned change in the 
United States.   Statistics show that Saudi Arabia, Canada, Mexico, and Venezuela are the four 
major oil suppliers to the United States.   In the first six months of 2002, Saudi Arabia supplied 
1.507 million barrels of crude oil to the US market every day; Canada, 1.37 million barrels; 
Mexico, 1.265 million barrels; and Venezuela, 1.108 million barrels.

    Russia Needs An Enormous Amount of Funds To Exploit Its Energy Resources.

    On 1 and 2 October 2002, Russia and the United States held a summit of their energy industries 
in the oil city of the United States - Houston in the State of Texas.   From 2 to 4 May, Russia was 
invited for the first time to attend the meeting of the "Group of Eight" energy ministers in 
Detroit.   Before this meeting, Russian Energy Minister met with US Vice President Dick Cheney to 
discuss the plan for Russia and the United States to strengthen bilateral energy cooperation.   
Among the Group 8, Russia, Canada, and Britain are energy exporters, and the United States, Japan, 
France, Germany, and Italy are oil and gas importers.

    On 24 May 2002, Russian and US presidents signed in Moscow the "Joint Statement on New 
Russian-US Energy Dialogue" and the "Joint Declaration of Russian-US New Strategic Relations."   In 
the "economic cooperation" section, they pledged to strengthen cooperation in the area of energy, 
especially the prospecting and exploitation of oil and gas resources.

The Houston energy summit was held within the framework of Russian-US energy dialogue, and US 
President Bush and Vice President Cheney extended congratulations to the summit.   Russian minister 
of economic development and trade and minister of energy and US secretary of energy and secretary 
of commerce attended the summit as rotating chairmen.   Russian and US oil and gas exploitation and 
transportation companies and noted experts and scholars attended the summit.   More than 400 
representatives from over 100 energy companies of the two countries were present.

    In 2002, Russia's daily oil output exceeded that of Saudi Arabia and ranked second in the 
world, next only to the United States whose daily output was 8.1 million barrels.   Russia is the 
world's largest natural gas exporter and the second largest oil exporter, next only to Saudi 
Arabia.   The price in the world's oil market has a tremendous impact on Russia's economic growth.  
 When the world's crude oil price declines by $1, Russia's export will drop by $2 billion to$2.1 
billion, the growth rate of its GDP will decrease by 0.4 to 0.6 percent, and its investment growth 
will also drop by 0.7 to 0.9 percent.   At present, the focus of Russia's endeavor of increasing 
oil output is placed on Timan-Pechora because exploitation in east Siberia and the Far East region 
is extremely difficult due to complicated geological conditions.   Without foreign investment, 
Russian oil companies may not be able to ensure a growth rate of 7 to 8 percent in their output.

    Russia's crude oil output has continued to grow since 1999, but it has yet to reach the highest 
record of 590 million tonnes registered in the Russian Republic of the former Soviet Union in 1988. 
  According to the forecast of the International Energy Institution, Russia needs to invest $8 
billion to $10 billion in the next 20 years in order to maintain the crude oil output of 348 
million tonnes registered in 2001.   The daily output of more than 55 percent of Russia's oil wells 
has declined from 27.6 tonnes per well in 1980 to the current 10 tonnes.   To maintain continued 
economic growth, Russia under the leadership of Putin urgently needs foreign investment in oil and 
gas exploitation, but foreign investment is insufficient (direct foreign investment was merely $4 
billion at the end of 2000) because a sound legal system environment has yet to be established and 
laws on foreign companies' participation in

production have yet to be approved.

    Drawing US investment into Russia's oil and gas exploitation was an important item on the 
agenda of the Houston energy summit.   It is estimated that before 2030, Russia's energy industries 
need as much as $157 billion of investment.

    The United States Is Trying To Topple Saddam in order to Control Iraqi Oil.

    The strategic pattern of the world's oil energy politics is on the eve of major changes:

    1.   Neither the oil from Caspian Sea nor that from Russia and West Africa can substantively 
help reduce US reliance on the oil supply from Arab countries.   If the Saddam regime is toppled, 
sanctions on Iraq will naturally be lifted, and the future pro-US Iraqi regime can increase its oil 
output from the current 2 million barrels to over 6 million barrels per day, approaching Saudi 
Arabia's daily output and thus challenging and deterring its status in OPEC and reducing its share 
in the source of US oil import.   Therefore, to resolve the energy security issue once and for all, 
the United States has acted willfully and is ready to bypass the United States to launch a war on 
Iraq for the purpose of toppling Saddam, establishing a pro-US regime, and turning on the "valve" 
of Iraqi oil which ranks second in the world in terms of reserves.

    2.   The tension between Russia and Georgia since March 2002, especially the tension between 
them in recent period, has resulted mainly from Russia's strong dissatisfaction with Georgia's 
active participation in the construction of the main Baku-Tbilisi-Ceyhan oil export pipeline from 
Caspian Sea.   The tense relations between the two countries were not because of the Chechen and 
Arab terrorists hidden in the Pankisi Gorge.   Georgia now holds the key to the contention between 
the United States and Russia for Caucasus-Caspian Sea-Central Asia geopolitical and economic 
interests.   Russia cannot accept any attempt to elbow it out of the traditional interest zone.   
Although Georgian president has emphasized that Chechen bandits within Georgian territory have been 
eliminated, the relations between Russia and Georgia will remain tense for a long time to come and 
will be difficult to improve.

    3.   Russia has worries that Iraqi oil would be controlled by the United States in the future.  
 While opposing US use of force against Iraq, Russia has been making double preparations.   In late 
August 2002, Russian diplomat A. Koloshkin [name as transliterated] met in secret with Qanbar, 
representative of National Congress that is an Iraqi opposition

party, in Washington.   How to "divide Iraqi oil" and ensure that the "post-Saddam" Iraqi 
Government returns the debt owed to the Soviet Union, which totals as much as $8 billion to $11 
billion, is the supreme national interest of Putin's Russia.

    4.   After the "9/11" terrorist attack, the United States has been eager to diversify the 
sources of its oil import in order to reduce its reliance on Saudi Arabia and other oil producing 
countries in the Gulf area.   Seizing this opportunity, Russia is contending with Arab countries 
for exporting more oil to the United States.   The Houston energy summit would promote the 
Russian-US cooperation in oil and gas exploitation and marketing.   Russia has sought advice from 
the United States on establishment of national strategic oil reserve program, and

both sides have also discussed the "post-Iraq" oil issue and other issues, such as US investment 
and technical support to Russia's oil and gas exploitation and long-term export of oil to the 
United States via Murmansk, the Far East region, Black Sea ports, and Croatia's Omishal deep-water 

    5.   The United States has striven sedulously to break Russian monopoly in the export of oil 
and gas from Caspian Sea, and US-Russian contention for the oil and gas resources in the countries 
around Caspian Sea has become increasingly fierce.   After the presidents of Turkmenistan, 
Afghanistan, and Pakistan decided to build the Turkmenistan-Afghanistan-Pakistan natural gas 
pipeline (led by the Union Oil Company of California, Unocal, and with Afghan Karzai as a 
shareholder) on 30 May 2002, presidents of Croatia, Azerbaijan, and

Turkey held a foundation stone laying ceremony in Baku for the Baku-Tbilisi-Ceyhan pipeline on 18 
September 2002.   A ground-breaking ceremony was held in Turkey's Ceyhan Harbor on 26 September 
2002 for the west section of the pipeline.   Proceeding from geopolitical interests, the United 
States plans to invest $2 billion and spares no effort to encourage the BP company to lead in the 
construction of the pipeline.

    6.   After "9/11," the United States has send troops to Central Asia and has "killed two birds 
with one stone."   When the counter-terror war in Afghanistan comes to an end temporarily, the US 
long-term strategic objective in Central Asia will be focused on "contending for and controlling 
the Central Asia-Caspian Sea oil and gas resources."

    We should track, study, analyze, and judge Russia's change of attitude toward the effort to 
topple the Saddam regime led by the United States and Britain so that China can bide its time and 
adopt a flexible stand in the UN Security Council.   With the advent of the post-Iraq era, the 
United States will control the Iraqi oil and force down the world's oil price in order to stimulate 
the economic recovery and growth in the United States.   The price level of less than $20 per 
barrel for crude oil is, in general, favorable for China, as a large oil importer, to

maintain sustained economic growth and establish oil strategic reserves.   When Washington regains 
the power to control and regulate the world's oil price, the pro-US Iraq will then replace Russia 
and become capable of contending with OPEC as Russia is capable of now.   Russia, whose current 
daily oil export volume reaches as much as 4.7 million barrels, evidently wants to keep the price 
strong, but its daily export volume accounts for merely 20 percent of the US daily consumption.   
Russia's current oil export to the United States is also exploratory and accounts for 1 to 1.6 
percent of the US oil import.   Therefore, Russian-US energy cooperation is tactical and not 
strategic to both sides.

    The contradiction between the United States and Russia remains the major contradiction in 
Central Asia.   Relying on its powerful economic and military strength, the United States has 
resorted to economic, political, and security means to actively intervene in Central Asian affairs 
and, in particular, has won success one after another and achieved great progress in the contention 
for energy resources and security cooperation.   Because Russia is weaker in strength and has to 
concentrate on resolving domestic economic issues, it is relatively on

the defensive.   The United States spares no effort to oppose Russian endeavor to monopolize the 
oil and gas exporting pipelines in this region and maintains that it is detrimental to the 
stability of the region.   For some time to come, the contradiction between the United States and 
Russia will remain the major contradiction in Central Asia, and the situation where the United 
States stays on the offensive and Russia is on the defensive will continue for a considerable time 
to come.

    China and Russia Adopt Measures for Energy Cooperation.

    Against the backdrop that the United States steps up efforts to implement the Central Asia 
strategy, profound changes are taking place in the combination of forces in Central Asia and will 
have a series of influences, both beneficial and adverse, on China.   In general, they will be 
beneficial to China, and we should attach importance to them and adopt corresponding measures.

    Russia's status as a large oil and gas producer and exporter has become increasingly prominent 
and consolidated.   Possessing 35 percent of the natural gas reserves, 12 percent of the oil 
reserves, and 16 percent of the coal reserves of the world, Russia is the world's largest energy 
producer and exporter.   It will maintain a 7-percent increase in its oil output in the future.   
It has more than 230 oil exploitation enterprises, and more than 90 percent of its oil output comes 
from 10 large oil and gas integrated companies.   Oil and gas industries occupy a special place in 
the economy of the Russian Federation, ensuring about 40 percent of its budget and 40 percent of 
its income from export.   Russia has discovered 22,000 oil and gas fields, and more then a half of 
them are being exploited.   Russia's potential reserves of oil and gas resources total 90 billion 
tonnes, but 85 percent of them are in the remote Siberia and offshore continental shelf.   Russia 
exports 33 percent of the natural gas and 41 to 48 percent of the crude oil it exploits.   With its 
natural gas reserves and output ranking first in the

world and its oil reserves and output ranking second, next only to the Middle East, Russia is a 
large owner of oil and gas resources and a large oil and gas producer in the world.

    East Russia holds an irrefutable and irreplaceable position as a resource-rich country (energy 
supplier) capable of building a balanced oil and gas structure in Northeast Asia in the 21st 
century, and Russia plans to promote the in-depth development of Siberia and the Far East region 
with the exploitation of oil and gas resources.   The idea of "promoting security with cooperation" 
has become the common understanding of Russian policymakers.   East and west Siberia, the Far East 
continental shelf, and the European Arctic continental shelf are

important regions where Russia will find new oil and gas reserves and which will replace other 
places to become oil and gas producers in the 21st century.   Based on conservative forecast, the 
peak value of Russia's oil and gas exploitation will come later than that of the world (the peak 
years for Russia's oil and natural gas exploitation will be 2020 and 2030, respectively, while the 
world's oil exploitation will begin to decline between 2000 and 2015 and natural gas exploitation 
will begin to decline in 2030).   Judging from a greater time span, therefore, it is irresistible 
for Russia to establish and maintain its status as a resource-rich country thanks to the increasing 
foreign investment in energy, and oil and gas resources may become an important material foundation 
for Russia to restore its status as a big power.

    It is desirable that China adopts the following measures for its energy cooperation with Russia:

    1.   China should continue to strengthen and substantiate the hard-won strategic partnership 
with Russia, maintain closer high-level contacts with it in the area of energy, actively create and 
seize the favorable opportunity that may be gone for good if the grip is slightly relaxed, and 
muster funds and financial resources (even issue special treasury bonds for "overseas oil and gas 
exploitation" at crucial moment) to make China one of the largest investors in the oil industries 
of east Siberia and the Far East region.   In its cooperation with Russia in energy and military 
technology, China should give prominence to energy cooperation step by step, because the 
cooperation in these two areas will guarantee an annual trade volume of $20 billion to $30 billion 
between China and Russia in the coming 10 years (the annual trade volume of pipeline oil alone may 
reach $5 billion in the next five to six years),

in order to enhance the economic mutual reliance between the two countries.

    2.   While making an unequivocal promise not to hinder Russia from entering WTO, China, as a 
member of WTO, should insistently ask Russia to open its Siberia and Far East energy and labor 
markets to China and to reduce its import tariffs on light industrial and textile goods and 
chemical, electronic, and agricultural products.

    3.   Taking advantage of the mutual need of interests between China and the United States in 
the international counter-terror action, China should make it clear that it is realistically 
reasonable for China to internationalize and diversify its sources of import.   In the new energy 
"triangular relationship" between China, Russia, and the United States, the United States and China 
are widely different in their energy consumption structure.   China should make the best of its 
status as a resource-rich country, a country in the continental bridge, and a

terminal consumer market and lobby the US Government through the International Energy Institution 
and the transnational oil companies of the West (especially Exxon-Mobil, Shell, and BP), which have 
close cooperative relations with the China National petroleum Corporation, the China National 
Offshore Oil Corporation, and the China National Petrochemical Corporation and are seeking enormous 
business opportunities and economic interests in China, to prevent and resolve the strategic 
conflict between China, a new and second largest energy consumer, and the United States, a 
traditional largest energy consumer in the world.

    The Economic Interests of Russia and the United States Are Different.

    4.   China and Russia still have vast room for cooperation in their efforts to oppose the US 
attempt to build a monopolar world, its hegemony, and power politics.   Despite the close 
coordination between Russia and the United States in the international counter-terror struggle over 
the past year, the foundation stone of Putin's foreign policy lies in the pursuit of the maximum 
economic interests.   In the international counter-terror efforts, Russia and the United States 
have fairly identical political interests, but their economic interests are different.   Since July 
2002, Russia has shown signs of alliance with what the United States firmly believes as the "axis 
of evil" -- Iraq, Iran, and DPRK.   Moscow is unwilling to give up the nuclear power station 
contract worth $800 million with Iran, signed a 10-year economic cooperation treaty worth $40 
billion with Iraq, and invited DPRK to participate in the development of its Far East region.   In 
addition, Russia intends to support US use of force against Iraq in exchange for its sending troops 
to Georgia (pro-West Georgia is a transit country for oil and gas transmission from Caspian Sea to 
the market in the West).   It can be seen that the counter-terror coalition between Russia and the 
United States and the cooperation mechanism between Russia and NATO's "20 countries" are faced with 
a new test.

    After the "9/11" incident, large-scale adjustment and improvement have been made in the 
relations between Russia and the United States and between Russia and NATO.   The focus of the 
cooperation in foreign affairs in the Sino-Russian strategic partnership of cooperation established 
in April 1996 has begun to shift from global and regional cooperation to bilateral cooperation, and 
Sino-Russian cooperation in military technology and oil and gas exploitation has become even more 
important and urgent.   In Russia, a debate is being held on which

pipeline to build, the one from Angarsk to China's Daqing or the other from Angarsk to Nakhodka.   
Sino-Russian oil and gas cooperation is a matter bearing on China's national economic security and 
interests and improvement of the Sino-Russian strategic partnership of cooperation.   Before large 
amounts of US and Japanese investment enter east ad west

Siberia and the hinterland of the Far East region (it has entered the Sakhalin Island), the Chinese 
Government should start developing the Angarsk-Daqing oil and gas pipeline project as soon as 
possible to ensure that it goes into operation on schedule in 2005.

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