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CHINA SEEKS TO DIVERSIFY ITS OIL IMPORTS


Fueled by an expanding economy, China has become increasingly dependent on foreign oil, with 50% of its consumed oil being imported. Of that, 58% of the oil currently comes from the Middle East. While China currently seeks to diversify its oil sources, the country has found it hard to increase its supplies in other regions, such as Africa, Latin America and Eurasia, due to the regions' constant political instability, lack of infrastructure and historical bad relations.



   
Fueled by an expanding economy, China has become increasingly dependent on foreign oil,  with 50% of its consumed oil being imported. Of that, 58% of the oil currently comes from the Middle East.  While China currently seeks to diversify its oil sources, the country has found it hard to increase its supplies in other regions, such as Africa, Latin America and Eurasia, due to the regions’ constant political instability, lack of infrastructure and historical bad relations.

In fact, figures from 2008 have forecast  Middle Eastern oil to comprise 70% of total Chinese oil imports by 2015. However,  the global financial crisis has influenced China to reverse its fuel security strategies  this year, as the country seeks to improve its international reputation and diversify its markets in light of the world’s sagging economy.

China’s relations with the Middle East have been controversial and have severely influenced China’s foreign reputation. While China sees the importance  to improve ties with oil-rich and stable countries like Saudi Arabia, the Chinese nation has also significantly increased economic relations with oil-rich but more unstable nations such as Iran, Iraq, and Syria.
   
China’s burgeoning relations with Iraq, Iran and Syria have the potential to severely hinder US-China relations. While China will potentially gain from trade and expanded influence, the nation’s overall international reputation may suffer, as its involvement with these controversial regions might contradict Western interests and policies.

China’s size and growing global influence, along with its nuclear capabilities and UN Security Council veto positions have raised serious international concern  over Sino-Arab ties.  Possible military collaboration with Iran for instance, might substantially harm US-China relations. China’s growing influence in the region might also result in China playing a significant part in future Arab conflicts and regional security in the Middle East. Moreover, local instability in countries such as Iran and Iraq  might pose a threat to the security of trade relations.

Further increasing China’s need to diversify its oil imports lies the global financial crisis which has  slashed demands and supplies from its main trading markets such as the US, Europe and the Middle East. As China’s trading markets began to shrink, opening new markets and decreasing its previous reliance on only a few strong markets became a necessity.

Thus, China has begun to place significant efforts in strengthening relations with Latin America and Eurasia, particularly in the area of fuel security, as it is a crucial necessity for the country’s growth.

In fact,  Chinese Vice-President Xi Jinping is expected to visit Venezuela this week in an effort to boost ties and cooperation in the Latin American region. China plans to sign an agreement regarding a joint venture with Venezuela’s state oil company, PDVSA. The agreement would allow for “the exploration, exploitation, processing, refining and transportation of crude oil,” a Venezuelan foreign ministry statement said. The ministry further stated that both countries are expected to “have a long-term strategic alliance for the next 100 years for the joint production of oil.”

China’s Vice President also plans to visit Cuba, Brazil, Colombia, Jamaica and Mexico, as it tries to further establish ties in the region. Moreover, Beijing has  also turned to Kazakhstan and Russia as it tries to further diversify its oil supply avenues.

The country  has recently signed a $25 billion deal with Russia, where China Development Bank will lend $15 billion to Rosfnet, a Russian oil firm, and $10 billion to Transfnet, a state  pipeline firm. In return, Russia is expected to supply China with 15 million tons of oil annually for the next 20 years.

These recent deals represent China’s efforts to improve its international reputation and diversify its oil imports, as it currently relies on oil supplies that have been deeply affected by the global financial crisis. Meanwhile, oil exporting countries that make deals with China, are expected to highly benefit from infrastructure and development opportunities.

Source: AsiaEcon.org
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Source: www.asiaecon.org |


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