The Dispensable Nation: American Foreign Policy in Retreat

by Vali Nasr

  Coal still accounts for 70 percent of China’s energy consumption and 80 percent of its electricity supply,30 but oil is catching up fast and is already the main topic of concern when China considers its global outlook and interaction with international markets.

  James Fallows of the Atlantic explains China’s growing hunger for oil as a peculiar facet of its growth. “As fast as [China’s] economy grows, its energy consumption grows faster still. Each percentage point increase in economic output leads to a more than proportional increase in demand for energy.”31 Two decades ago, China produced all the oil that it needed and even exported some.32 China started importing oil in 1993. By 2005, its demand for crude had doubled, and it had become the world’s second-largest oil importer, behind only the United States. China’s demand for oil will double again in the coming fifteen years or so. Well before then, in 2020, China is projected to be importing 7.3 million barrels of crude a day—half of Saudi Arabia’s planned output.33 By this time, China will be the world’s number one oil consumer, and the manic rate of urbanization is likely to keep China deeply dependent on oil. In the next decade alone, the rise of new Chinese cities, according to a McKinsey report, “will account for around 20 percent of global energy consumption and up to one-quarter of growth in [global] oil demand.”34

  To sate its burgeoning hunger for energy, China has gone on the prowl for coal, oil, and gas around the world.35 Around 1999, China adopted the “Go Out” policy of encouraging diplomats and state-owned companies to secure long-term oil contracts.36 Chinese interests looked first to low-hanging fruit (places where there is little competition or Western presence) in Thailand and Peru, and then sought larger deals in Sudan and South Sudan. China has invested $44 billion in oil projects beyond its borders, half of it in Africa. Between 2002 and 2003, trade between China and Africa doubled to $18.5 billion, most of it oil imports.37 But none of this is enough. China needs the larger supplies of Russia and the Middle East. It craves the stability of long-term supply contracts but also seeks to invest in “upstream” oil and gas exploration, which it has done in Iran. Iran’s rich oil and gas reserves remain a significant opportunity for the Go Out strategy.38

  East Asia is emerging as the ultimate energy importer, whose needs are perfectly matched with the supply potential of western Asia (comprising the Middle East and Central Asia). The Middle East exports around 30 million barrels of oil per day, and East Asia imports the same amount.39

  Securing fossil fuels at the source is not China’s only concern. It is also worried about the security of its supply routes.40 The first step in America’s pivot to Asia has been to build up military ties with Australia, the Philippines, Vietnam, and India. In a military competition, America has the clear advantage of using its superior sea power to squeeze China’s oil supplies. China, meanwhile, is worried about the U.S. Navy’s control of the Persian Gulf. Also a worry is the narrow, five-hundred-mile-long passage between Sumatra and the Malay Peninsula known as the Straits of Malacca. This shallow, heavily traveled, easily blocked stretch of water—in the Phillips Channel just south of Singapore it is less than two miles wide—is the eastern doorway to the Indian Ocean and one of the world’s critical maritime chokepoints. More than 85 percent of the oil and oil products bound for China pass through the Straits from west to east. For Chinese strategists, resolving what they call “the Malacca dilemma” is a major preoccupation.

  The Chinese are concerned about American strategic relations from Japan to India, for they see in U.S. dealings the outlines of a noose that could choke China’s access to energy.41 In the run-up to World War II, America, Britain, and the Netherlands did deny energy- and resource-poor Japan access to oil, rubber, and iron shipments from Southeast Asia and the Dutch East Indies. This is a lesson that is not lost on China’s strategic decision makers. During the Cold War, the Soviet Union cast hungry eyes on the Persian Gulf with the idea of doing something similar to the West. Access to energy, and therefore the Middle East, will be at the heart of the next global rivalry.

  In response to its concern, China is building a blue-water navy and has invested in the “string of pearls” strategy of building bases in the Indian Ocean (in places such as Sri Lanka) to protect its sea routes to Africa and the Middle East. There is already a brisk competition between China and India over which country will dominate the Indian Ocean. The two Asian powers eye each other with suspicion even as they cooperate to address the menace of piracy.42 But China in particular is also worried about U.S. control of the high seas, which, added to America’s dominant position in the Persian Gulf, puts China’s energy supplies at risk. The Scarborough Shoal row, in which China’s assertion of primacy over the South China Sea met with resistance from some Southeast Asian nations with U.S. backing, brought the problem into sharp relief. At that point, America had already announced that it would deploy 2,500 U.S. Marines to Australia and help the Philippines to upgrade its navy.

  In order to escape the Malacca dilemma, China has turned to a series of overland pipelines linking the eastern industrial centers of Shanghai and Guangzhou with western China and Turkmenistan, respectively.43 China has also looked to Myanmar as an alternate route that avoids the Straits. There, Beijing has had to compete for influence with Delhi. India, too, is growing rapidly, and is looking to the same Middle Eastern and Central Asian sources to sustain its economy. India, however, already has a sizable navy and is America’s strategic partner; the Bush administration sought to bolster India as a counterweight to China by forging closer ties with Delhi through measures such as a deal regarding nuclear power for civilian uses.

  China and India have a contentious history. They fought a short, sharp border war high up in the Himalayas in late 1962, and India remains China’s strategic nemesis. They do plenty of trading now, but their rivalry will come to the fore as they vie against each other to gain access to western Asia’s energy resources on the best terms. In its extensive efforts to secure its access to Middle Eastern and Central Asian oil and gas, China is acting upon its fear of India as well as its fear of the United States.

  Myanmar also poses a challenge to China’s plans. In early 2011, Myanmar’s military regime began a surprising series of reforms that have led to a thaw in relations with Washington. This cannot be pleasing to China, which had been treating Myanmar as effectively a client state. In fact, fear of excessive dependence on Beijing seems to be one of the motives driving the reform advocates within Myanmar’s ruling regime. In mid-2012, Myanmar suspended work on the massive Myitsone Dam that China had been building across the Irrawaddy River—another signal that Naypyidaw is trying to put some modest distance between itself and Beijing.

  Farther to the west, China has earmarked $12 billion to develop the port of Gwadar on Pakistan’s Arabian Sea coast. The idea is to create a place where petrochemicals piped down from Central Asia (Kazakhstan and Turkmenistan) and minerals shipped from Afghanistan can be loaded onto tankers and cargo ships bound for China. The Gwadar project has been hampered by instability and security challenges—the product of clashes between local Baluch separatists and the central government—of the kind that U.S. multinationals such as ExxonMobil have long had to cope with in Indonesia or Nigeria. But China continues to invest in Gwadar and work to bring the port facility under its control.44

  Little wonder, then, that China has been interested in still other pipelines. These include one going from Iran into Pakistan and then perhaps eventually through the Hindu Kush mountains into Xinjiang. Another would start in the Central Asian gas fields of Turkmenistan and then snake its way through Afghanistan and Pakistan to Gwadar or into Xinjiang. Here again, however, there is U.S. competition. Washington is talking about a pipeline from Turkmenistan to India (not China) as part of America’s “New Silk Road” initiative to bring commerce and economic development to Afghanistan and other countries along the historic overland trade routes between China and Europe. The New Silk Road is a lofty idea that would work if there were true American co
mmitment to Afghanistan’s stability and substantial financial commitment to build infrastructure, develop industry, and facilitate trade, not to mention commitment to improved relations with Pakistan and engagement with Iran. Without this commitment, at best the idea will become the basis for a Chinese regional economic system.

  Two decades ago, China’s large industrial and population centers lay almost exclusively along its east coast. That region remains a dynamo, but people and production—and the hunger and thirst for energy inputs—are moving west.45 China now needs more and more energy for its middle and western regions, and that is another reason why pipelines into China’s southwestern provinces of Yunnan (from Myanmar) and Xinjiang (from Pakistan) are increasingly attractive.46

  Political scientist Kent Calder writes that energy interdependence is tying eastern and western Asia together in new ways. The Chinese-Turkish deal further shows that East Asia’s need for closer ties with West Asia is matched by West Asia’s need to trade with the East. In 1980, East Asia accounted for 20 percent of the Middle East’s imports; that number has now doubled to 40 percent and is likely to grow further.47 China now carries on a robust trade with the Persian Gulf monarchies and is rapidly filling the gap left by the withdrawal of Western interests from Iran and Pakistan. China’s economic reach in Asia is vast and rapidly growing. Its political touch and military sting are sure to be felt soon.

  China’s rise has so far not been as disruptive as that of Japan or Germany (or Russia) in the last century. The economic rise of those countries had, to put it mildly, a distinctly militaristic edge. The hunger for resources and markets drove those powers to start expansionist wars. The Chinese mantra since Deng Xiaoping launched economic reforms in 1978, in contrast, has been “a peaceful rise in a harmonious world.” There is a detectable air of caution and patience in China’s strategic thinking, but that barely masks the country’s determination in protecting its interests and realizing its goals. Beijing has ambitions but doesn’t want trouble.48 Given China’s manifold domestic challenges and all that it still must do to consolidate its economic gains, Beijing knows that it “is not in a position to be arrogant or boastful” (the words are those of Deputy Foreign Minister Dai Bingguo). And yet, China still sees its interests as separate from those of the rest of the world, and its hunger for resources and markets could end up in military conflict.49

  The “we don’t want trouble” approach sounds nice, in other words, but it may prove increasingly hard to sustain, exhibit one being the current saber rattling in the South China Sea. But the current spat over the South China Sea is not all that puts the United States and China on a collision course or makes China’s rise a source of global tension, for that matter. China is, after all, increasingly an imperialist power. Imperialism emerged in the nineteenth century as growing European economies looked around the world for commodities and markets to fuel their gathering industrialization.50 European powers then—much like China today—invested heavily in securing trade routes and building infrastructure for resource extraction.

  Journalist Steve Coll has described what he calls China’s “mercantilist approach to energy” and the premium that it places on physically owning oil supplies. This flies in the face of the fungibility of the global oil market. Whereas America thinks of global oil markets as an integrated whole, governed by rules of free exchange, China seeks a direct supply-and-demand relationship between itself and wherever the oil comes from. That harkens back to nineteenth-century colonialism. The upshot will be greater Chinese control of the supply–demand relationship and deepening political involvement with, and dependency on, energy-producing regions and countries. The scent of nineteenth-century colonialism is not lost on Coll, who calls China’s approach “neo-colonial.”51

  “Peaceful rise” will not go hand in hand with mercantilism. And if a peaceful rise does not work, then, as Henry Kissinger has warned, America’s relationship with China could start to look like a version of the Anglo-German rivalry that haunted Europe on the eve of World War I.52 Germany was the rising, insurgent power then, hungry for energy and other commodities that would aid its expansion, eagerly seeking markets for the products of its burgeoning factories. Germany’s mercantilist approach collided with Britain’s dominance over the global economy—a dominance that was secured not only by the reach of a British Empire “upon which the sun never set,” but also by a Royal Navy that protected the commercial interests of many other nations before German expansionism.53 Germany turned to militarism, forming its High Seas Fleet, which supported the growth of its influence beyond continental Europe and set in motion a race to war in the first decade of the twentieth century.

  Similarly, America’s response to China’s mercantilist push against open trade and commerce puts us on a collision course with China. The Middle East will be at the center of that clash when it happens.

  The example of European imperialism holds other lessons too. The initial outflow of capital from Europe to the New World (British capital played a large role in building the iconic cattle-ranching and railroad businesses of America’s Old West) was soon followed by the flow of capital back to Europe as cheap commodity prices and industrial exports sold to the New World yielded European countries huge profits. Things did not run smoothly everywhere, however. Some local populations balked at the unfair terms of trade with Europe, and European powers reacted in some cases with the use of force and even outright territorial-political conquest. Imperialism evolved into colonialism, which made sense because European powers were struggling not only to deal with restive locals but also to protect their holdings from rival powers.

  Yesterday’s imperialism has gradually shifted east as a latecomer to the party, China, has begun investing heavily in Africa, Latin America, and western Asia.54 It is building railways and ports in sub-Saharan Africa and Afghanistan, much as Britain and France once did in India or Africa.55 Chinese managers and workers are moving to Africa, living and working in colonies that are reminiscent of British cantonments in colonial India. These Chinese are there to stay for the long haul.

  China is also doling out cash to rulers, such as Venezuela’s Hugo Chávez, as Britain, France, and the Netherlands once did. In the “game of nabobs” that Britain played with its European rivals in India, the object was to win the allegiance of local rulers in order to control trade routes. In a contemporary version of the ploy, Beijing’s deep investment in Cambodia has separated that country from its Southeast Asian neighbors on issues that matter to China, creating discord in the ranks of ASEAN just when the United States is trying to rally the regional grouping to resist Chinese domination of the South China Sea. The game of nabobs goes on.

  Across Africa and Asia today, country after country is happy to have Chinese money building railways and ports for moving commodities to China. As for what floods of cheap Chinese imports are doing to local manufacturing, that is another, less happy story. In Nigeria and Pakistan, Chinese textiles are driving local producers out of business. One Pakistani textile manufacturer told me: “Everyone worries that if we open trade with India its textiles will put us out of business, but the Chinese are already doing that.” Soap manufacturers and even producers of crockery are saying the same. According to some estimates, China now accounts for a staggering 90 percent of that market in Pakistan.

  We know from history that the imperialist formula of monopoly control over commodity exports plus plentiful manufactured goods imports will lead to political trouble. The initial enthusiasm for Chinese investment will give way to anger at the net outflow of wealth to China as it extracts commodities and dumps cheap manufactured goods in country after country. To sustain the economic arrangement, China will have to get involved politically. It will have to delve into the domestic politics of countries, taking sides in messy internal fights, but also take a position on regional disputes. And when its interests warrant making important decisions for desired outcomes, persuasion will be the method of choice, and force the method of last r
esort.

  China will also encounter other global players looking for the same commodities and resources. America, Europe, India, Japan, and South Korea, as well as other emerging nations, will all be looking for the same iron, copper, manganese, bauxite, rare earth metals, and oil. The gold rush boom in Mongolia—which has attracted $15 billion in foreign investment and is pitting the United States against China in the vast but sparsely populated country of 3 million people—along with the South China Sea disputes provide a window into this. After all, China has already seized the Spratly Islands, a collection of rocks near undersea oil deposits. Elsewhere, China has the first mover’s advantage in Africa and is trying to elbow its way to domination in Southeast Asia. But to protect its investment and prevent supplying countries from playing it against its rivals, China will have to exercise more political control. As China faces the same kind of challenges protecting its assets that once led Europe to embrace colonialism, a “peaceful rise” may grow considerably less peaceful.

  The Chinese, however, are not looking that far ahead. For now, the U.S. security presence in the Persian Gulf and other regions is providing the stability upon which Beijing can free-ride as it develops its interests abroad. China gets to have it all. It enjoys the luxury of engaging a region’s troublemakers and unstable states—Iran or Pakistan, for instance—while at the same time benefiting from advantageous trade conditions.

  As we have seen, America has been lobbying the Saudis to sell China more oil in order to gain Chinese help in reining in Iran and Pakistan. But why should that be? Why shouldn’t Beijing be offering us concessions in order to get America to maintain its costly investment in regional security? Many observers muse that in the not-too-distant future, when any U.S. need for Middle Eastern oil is a fading memory and the only customers for Persian Gulf oil are in East Asia, China will be in the unenviable position of relying entirely on U.S. security to protect the Gulf’s crucial wellheads. And yet, it is not that simple. China is happy with free-riding now because its relations with America have been, generally speaking, quiet. Since 9/11 we have been focused on the Middle East, ignoring China’s rise for the most part. But as China finds itself in America’s crosshairs, the benefits of freeing its Middle East interests from the clutches of American influence will outweigh the security dividend it gains from American presence in the region. China will soon welcome the American exit from the region even at the cost of shouldering the security cost itself. American retreat from the Middle East will be welcomed in China as a strategic boon; and this is exactly why it should not happen. This is already evident in the Chinese attitude toward Central Asia. This region is not only a source of valuable energy for China, but owing to its cultural and ethnic ties to the Turkic Muslim minority living in China’s westernmost provinces, it is also of security and geostrategic interest to China. Beijing has sought to tightly integrate Central Asia into its economic orbit. This has also meant allying with Iran and Russia—the other key players in the region—to limit American presence in the region. The Chinese-founded and -backed Shanghai Cooperation Organization (SCO)—a rival to American power wrapped as a counterweight to NATO and the Gulf Cooperation Council (GCC)—reflects this approach. It should be America using its presence in the Middle East to deny China hegemony over commerce. That would be for the greater good of the global economy.