Beijing fears for its oil supplies

As the Islamic State of Iraq and the Levant (ISIL) progress their attack in Iraq, China increases its attention on events in the Arab country. The People’s Republic buys about half of the production of Iraqi oil about 1.5 million barrels a day, has invested around 7,300 million euros in the energy sector and has around 10,000 Chinese workers in those oil fields.

So far, the official slogan of the Beijing government is calm. Unlike what happened during the recent anti-China protests in Vietnam for its sovereignty dispute in the South China Sea, where Beijing repatriated more than 3,000 of his countrymen, there has been little evacuations of Chinese citizens in Iraq. The Foreign Ministry spokesman, Hua Chunying, states that ” the Chinese employees in Iraq are in relatively safe areas.”

Beijing  “supports the efforts of the Iraqi government to maintain domestic stability and fight terrorism, and hopes that stability and order is restored as soon as possible”, says Hua. “China will continue doing everything in their power to help Iraq. Meanwhile, hopes the Iraqi party take concrete measures to ensure the safety of Chinese enterprises and personnel in Iraq measures. “

After the fall of Saddam Hussein, Chinese oil broke tackles in the Iraqi energy sector, where he quickly became the top investor. While the U.S. lost interest in the Arab country at the possibility of shale oil extraction in their territory, the Chinese state oil giant CNPC, the largest foreign investor in Iraq quickly acquired the rights to exploit fields such as Al Ahdab, southeast of Baghdad, and entered the consortium that extracts 37% of the crude Rumaila, Iraq ‘s main field. Indeed it has been in Al Ahdab where yes there have been some evacuations of Chinese citizens.

But the concern is not so much because the oil fields from falling into rebel hands. The state Sinopec also has interests in a field in the north, but in the Kurdish area, and 90 % of the production is concentrated in the south, in the predominantly Shiite areas near Basra, even far beyond the reach of ISIL. And in any case, as pointed out in a forum held in Beijing Wang Tao Security, Carnegie – Tsinhua Center for Global Policy, following the situation in Syria, South Sudan and now in Iraq, China ” in recent years has begun to look more stable energy suppliers such as Australia, North America or the UK. “

What worries China, which last year became the largest importer of oil in the world, above the U.S., it is the possibility of escalating prices. With a domestic reserves well below domestic demand, it is estimated that by 2020, the People’s Republic depends on imports for 66% of its oil needs, according to the U.S. Energy Information Administration (EIA). Precisely had been, in part, increased Iraqi production after the fall of Saddam and the war which allowed dodge a rise in prices in recent years despite international sanctions to punish Iran for its nuclear program.

An escalation in oil prices, which yesterday, reports Reuters, reached $ 114.89 per barrel of Brent oil, would be a major hole in the accounts of a China whose economy is showing signs of exhaustion and trying to overcome its high dependence on heavily polluting domestic coal.

This need to stock up on the outside can give rise, analysts say, to a certain shift in foreign policy, which forces to abandon their traditional stance of non-involvement to become more involved in global affairs. A first experiment in this regard is taking place in South Sudan, where China, the main trading partner of the youngest country in the world and very important interests in their oil sector, is actively involved in talks between the two sides and the mediators.

And situations like Iraq also open the door to greater cooperation with the United States. According to Wang, the two countries face important opportunities for cooperation in the area of energy security. One of them, she says, is ” improving the security situation in the oil fields and supplies.”

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Posted by Khalil Khan on Jun 25 2014. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.