Chinese Energy Security Policy

Interesting passage from Mikkal Herberg at the New America Foundation:

Where the leadership’s perceptions and the commercial interests of the NOCs do converge is the extensive direct political and financial support Beijing provides their NOCs to get ahead, i.e. to “catch-up”, in the highly competitive global oil industry. To outside observers and oil company competitors this collaboration, whether state or NOC-led, has all the markings of “China Energy, Inc.” Nevertheless, what the leadership perceives as an energy security policy is, in practice, more an outcome of Beijing’s reflexive reliance on industrial policies and strong state support to build global national champions, as it does in other industrial sectors, from vehicles to the electronics industry to clean energy to the nuclear industry. The persistence of this approach is reinforced by other industries and bureaucracies which have learned to use the language of energy security to promote state support for their own global competitive advantage. For example, the Chinese tanker/shipbuilding industry has convinced the leadership that Chinese oil and natural gas imports will be more secure if carried on Chinese tankers, therefore justifying subsidies and cheap loans. As Erica Downs suggests in an excellent recent Brookings report, the China Development Bank (CDB) has strong converging interests with China’s NOCs insofar as large loans to support NOC overseas investments and loans to secure long-term oil and gas supply arrangements from key exporters like Russia, Brazil, Kazakhstan, Turkmenistan, Venezuela, and others, all handled through China’s NOCs, provides the CDB with badly needed credit-worthy opportunities to lend out its huge hoard of Chinese state foreign assets.11 The PLA Navy (PLAN) has also begun to cast security of China’s energy sea lanes as an increasingly vital PLAN mission helping to promote growing budgets. In some cases even provincial governments have employed the language of energy security to help promote provincial economic development, such as Yunnan’s promotion of an oil import pipeline across Myanmar, which in reality was mainly aimed at boosting Yunnan’s provincial economy. This suggests that the prevailing NOC-based, mercantilist character of China’s energy security policies is more deeply rooted than commonly understood. It is industrial policy masquerading as an energy security strategy. And a wide range of important industrial, financial, and bureaucratic interests have a stake in continuing along this path.

A couple thoughts:

1. This serves as a good reminder that no government is monolithic, and that bureaucratic infighting and policy-shaping characterize the foreign policy apparatus of every state. Organizational relationships matter, organizational culture matters, and problem framing matters.
2.  More than a few people argue that the mercantilist-light energy security approach makes little sense in context of the realities of the global energy market. If bureaucratic incentive (and momentum) is the real answer, then we may see China maintain broadly sub-optimal energy security policies for a long time. 
3. The implications for the Cooperative Strategy are very interesting. On the one hand, the extent to which the PLAN is arguing for resources based on a mission that is broadly compatible with CS-21 would seem to make continuing maritime cooperation between the USN and the PLAN possible. However, to the degree that the PLAN sees this mission mostly as a resource magnet rather than a genuine problem to be solved, cooperation would suffer.