2004 March 13 Saturday
Luft And Korin On China's Rising Demand For Oil And Saudi Arabia

Writing in Commentary Magazine Gal Luft and Anne Korin (both of the Institute for the Analysis of Global Security (IAGS)) have written an article exploring China's relationship with Saudi Arabia and China's growing need for oil entitled The Sino-Saudi Connection

According to a conservative estimate by the U.S. Department of Energy, China’s oil imports over the next two decades will grow by 960 percent. The International Energy Agency predicts that, by 2030, those imports, now at 1.9 million barrels a day, will rise to at least 10 million barrels a day, the current import level of the United States.

If the Saudis opted to acquire their own bomb, they would likely become the first nuclear power to have bought one off the shelf. Were this to happen, it would represent the culmination of a Sino-Saudi-Pakistani nuclear project that began in May 1974 when, following India’s ascension to the nuclear club, China sent scientists to assist Pakistan in developing that country’s own nuclear program. By the early 1980’s, China had supplied the Pakistanis with enough enriched uranium to build a few weapons. In 2001, the CIA reported that China was continuing to lend "extensive support" to Pakistan’s program. Today, Pakistan is estimated to have an arsenal of between 35 and 60 nuclear weapons.

How did Pakistan, with its grinding poverty, pay for this expensive project? Some of the costs were undoubtedly carried by the Chinese in pursuit of their own interests, including their rivalry with India. But considerable evidence suggests that Saudi Arabia played a part as well.

Luft and Korin make an argument familiar to regular ParaPundit readers: Growing Chinese demand for oil is going to result in a decreasing influence of the United States over Saudi Arabia and other Middle Eastern oil producers.

Even if Saudi Arabia does not pursue nuclear status, however, it has abundant reasons for looking east to China both for markets and for military assistance, just as China has abundant reasons for looking west to Saudi Arabia for continued access to Middle Eastern oil. And aside from these mutual interests, an alliance with China would hold other attraction for the Saudis. Unlike the U.S., the Chinese do not aspire to change the Arab way of life, or impose freedom and democracy on regimes that view such ideas with skepticism and fear. Indeed, Chinese attitudes toward the open societies of the West are markedly similar to those of the Arab despotisms themselves.

The Chinese also have at their disposal immense reserves of manpower, which they can deploy to protect the oil resources of any new allies they acquire. Thousands of Chinese soldiers disguised as oil workers, for example, are used today to guard petroleum facilities in Sudan. With 11 million men reaching military age annually, China could easily replicate this elsewhere. Finally, while the U.S. is continually castigated by the Arabs for its closeness to Israel, China’s ties with Jerusalem have never risen above the level of indifference.

The Institute for the Analysis of Global Security (IAGS) turns out to be an organization dedicated to promoting views which which I'm in incredibly strong agreement:

The Institute for the Analysis of Global Security (IAGS) is a non-profit organization dedicated to setting America free from the oil dependence that threatens its security. We believe that a shift from oil is the best guarantor of global security, prosperity, and freedom for generations to come. Through technology we can win the war on terror and shake the yoke of our energy dependence without compromising our way of life.

The IAGS website has additional articles which develop their line of argument.

What makes penetration and control of money transactions in the Arab world especially difficult is the Hawala system--the unofficial method of transferring money and one of the key elements in the financing of global terrorism. The system has been going for generations and is deeply embedded in the Arab culture. Hawala transactions are based on trust; they are carried out verbally leaving no paper trail.

The Saudi regime has been complicit in its people's actions and has turned a blind eye to the phenomenon of wealthy citizens sending money to charities that in turn route it to terror organizations. Furthermore, Saudi government money funneled into madrassas where radical anti-Americanism is propagated has been instrumental in creating an ideological climate which generates terrorism.

Reducing demand for oil would decrease the money available to spread hostile Islam and to support terrorism.

There are many strategies proposed by counter-terrorism experts to obstruct terrorist financing. Many of them are effective and, indeed, some of the steps that have been taken since September 11, such as freezing bank accounts and improving the scrutiny over international monetary transfers, contributed to a reduction in Al-Qaeda's financial maneuverability. But the only way to deal with the problem strategically is to reduce the disposable income and wealth generation capacity of terrorist supporters.

Hence, America's best weapon against terrorism is to decrease its dependency on foreign oil by increasing its fuel efficiency and introducing next-generation fuels. If the U.S. bought less oil, the global oil market would shrink and price per-barrel would decline. This would invalidate the social contract between the leaders and their people and stem the flow of resources to the religious establishment. It will likely increase popular pressure for political participation, modernity and reformed political and social institutions.

Reducing demand for Middle East oil would force the petroleum-rich regimes to invest their funds domestically, seek ways to diversify their economies and rethink their support for America's enemies. Only then financial support for terrorism could radically diminish.

It is very gratifying to read policy analysts whose analysis of the problems posed by US and world dependence on Middle Eastern oil agrees so very closely with my own. My most recent post on the topic is Demand For Oil Increasing From Rapidly Developing Nations. Also see my post on the problem posed by rapidly growing Chinese energy consumption: China Energy Consumption Growth Complicates Anti-Terrorist Efforts. See the bottom half of the post Intervention In Liberia Linked To Oil Dependency for Nobel Laureate Richard Smalley's appeal for a massive research and development effort to develop alternative energy technologies. For more on the threat of Saudi Arabia buying nuclear weapons see the post Without US As Ally Saudi Arabia Could Go Nuclear. My argument for why an energy policy aimed at obsolescing oil as an energyh source is found in the post Energy Policy, Islamic Terrorism, And Grand Strategy.

In my view it is not enough to reduce or even to eliminate US dependence on Middle Eastern oil. The main problem is not that the US is vulnerable to supply cut-offs. The biggest problem is that the whole world's demand for Middle Eastern oil is funding the spread of Wahhabi Islam, terrorism, and nuclear proliferation. While technologies that allow oil to be used more efficiently will be of some benefit the only way to reduce world demand for Middle Eastern oil is to develop technologies for producing energy that are cheaper to use than oil.

Share |      By Randall Parker at 2004 March 13 02:08 AM  Politics Grand Strategy


Comments
Engineer-Poet said at March 13, 2004 8:52 PM:

I have a suggestion for doing something about this. Unless I have something seriously wrong, it appears that many of the most outlandish desires of the ecological movement of the 70's are within reach today, just in time to help fight the war on terror.

AMac said at March 15, 2004 3:13 AM:

ParaPundit,

I agree with the sentiments you express in this (and other) posts. But I have major reservations, centered around the practicality and real-world effects of reducing oil imports from the terror-enablers--not about the project's desirability.

A while back, Steven den Beste had a long series of posts outlining an engineer's skepticism about the pros and cons of moving from a fossil-fuel-based economy to something else. Here is one quote:

It actually turns out that if we want to truly, substantially, rapidly reduce energy use the only way to do it is with lifestyle changes, and the only practical way to force that is through exceedingly harsh taxation (i.e. $3000 per year per car, $5 per gallon on gasoline). It's not a problem susceptible to a painless technical fix, mostly because we've already done most of what can be done easily.

Here is one of his articles; links therein will lead to others.

Big-picture issues aside, the major current-day problems with alternatives to coal and oil are that these fossil fuels are so cheap relative to anything else that there is little economic incentive for long-term and large-scale investments in alternatives. The single most helpful development in moving away from oil would be a very large and permanent hike in its price.

Of course, this means one (or both) of two things:

--A large Jimmy-Carter-style consumption or import tax on oil, sure to provoke resentment for its immediate and direct costs on personal consumption, and on the inflation and other macroeconomic effects it would cause. "Take your cod liver oil, we know what's best, it's good for you" isn't a message that's gone down well with the American electorate in recent memory. For those painful adjustments that I thought were justified, or for those that I disagreed with.

--A "natural" price increase due to increased demand over supply on the worldwide market, or an artificial price increase caused by a producers' cartel. While this would spur developments of alternatives, in the short and medium run, it would lead to an intensification of the major problem that you write about: the inflow of gargantuan sums to the Wahhibist (Salafist, etc.) countries and societies that fund the International Islamic Front and like organizations.

This is why, at the moment, I don't see a clear path forward.

Randall Parker said at March 16, 2004 7:26 PM:

AMac, I do not think a reducton of oil purchases by the whole world can be made to happen quickly. But I'm reminded of the story of the old man (this might be from Japan) asked why he is planting a tree since it will bear fruit for many years. He said all the more reason to plant the tree as soon as possible.

There is no quick solution to the threat of Islamic terrorism. Anyone who agrees with unpleasant view has to accept the need for starting down the road to pursue longer term goals to reduce the threat.

I see many approaches that will reduce the threat. Start spending $10 billion per year on energy research. Allow all oil fields in the US and offshore to be drilled. Make governments reduce their own energy consumption.

As for Den Beste: See my exchange with Den Beste here. He didn't effectively respond to my points. I've laid out the case for why I think photovoltaics could provide enough energy once they can be made cheaply enough. He just asserts it can not be done. Wrong. It is a solvable problem. I put Nobel winner Richard Smalley's opinion that energy is a solvable problem ahead of the pronouncements of naysayers. Technology advances. We can make it advance more rapidly. The question is not whether the problem can be solved but, rather, when will it be solved?

AMac said at March 17, 2004 9:05 AM:

>I'm reminded of the story of the old man planting a tree...
>There is no quick solution to the threat of Islamic terrorism...

Two yesses. Thanks for the exchange with den Beste link.

Richard Cook said at March 18, 2004 9:45 AM:

What about the feasibility of depolymerization? Its a process that converts any carbon based material to light oil, heavy oil and and agriculturally nuetral substance. I do not know if is practical or not, just a suggestion for down the road.

Joseph Somsel said at September 10, 2004 2:48 AM:

The flaw in the argument for the US using less oil is that a competitor will step in and use it instead. As oil is the highest net energy resource available, whoever makes the greatest use of the cheapest energy becomes the dominent economic power. For the US to unilaterally deny ourselves the most productive energy resource will just allow a competing society (China?) to take advantage of it.

However, I agree that we should be diversifying. After hydrocarbons (oil and natural gas) comes nuclear power. Solar is such a low net energy producer and is so fickle, an economy dependent on solar is bound to be non-competitive.

Randall Parker said at September 10, 2004 7:11 PM:

Joseph,

Reduced US demand for oil will reduce world market prices and therefore reduce the amount of money flowing to the Middle East.

But I'm advocating the development of energy technologies that can produce energy for a cost that is much lower than the current price of oil. Once we develop such technologies the whole world will use them since doing so will save them money. This will further reduce the flow of money to the Middle East.


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