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China Energy Quest Not A Threat

File photo of solar water heater energy plant at Kunming in China.
By Krishnadev Calamur
Washington (UPI) Feb 09, 2006
A U.S. Energy Department report this week said China's global quest for energy was not economically damaging to the United States, but that is unlikely to assuage many in the U.S. Congress who regard the world's second-largest energy consumer as a threat.

"Because China can be expected to consume the vast majority of any resources it does acquire, the effects of these purchases should be economically neutral," said the report, which was written in response to a request by House Resources Committee Chairman Richard W. Pombo, R-Calif., in the Energy Policy Act of 2005.

"Even if China's equity oil investments 'remove' assets from the global market, in the sense that they are not subsequently available for resale, these actions merely displace what the Chinese would have otherwise bought on the open market."

Much of that demand goes to satisfy China's economy, which has grown at some 9 percent a year since 1978, making it the world's third-largest trading nation and seventh-largest economy.

Since it became a net importer of oil in 1993, China has expanded its overseas exploration and production activities by signing deals in Azerbaijan, Iran, Iraq, Kazakhstan, Peru, Sudan and Venezuela, and has bloomed into the world's second-largest consumer of energy. Still, China's per capital energy consumption is one-eighth that of the United States, the largest consumer.

The Energy Department report, which was written in consultation with the CIA, the State, Defense and Homeland Security departments, did note, however, that there were "potential problems" with Beijing's deals with countries like Sudan and Iran, with which Washington has frosty relations.

"As a long-term trend, China's behavior in this respect runs counter to key strategic goals," it said. "China's tolerance for despotic regimes may undermine (U.S. foreign policy) efforts."

China's efforts to secure energy resources have found critics on Capitol Hill, however. Pombo said the report showed why the United States needed to make a concerted effort to form energy partnerships in other countries.

"China is marching forward while we argue inane debates and partisan rhetoric," Pombo said in a statement. "And China won't hesitate to march right over us in the upcoming decades if America does not improve its energy policy. We must take similar and aggressive steps to increase American supplies of renewable, alternative and conventional energy to grow our economy."

Much of the congressional opposition stems from an attempt last year by China's CNOOC Ltd. to buy Unocal Corp. The $18.5 billion bid was opposed by critics who said CNOOC's acquisition of a U.S. company would reduce oil supplies available to the United States. Others said it was the first step in China's growing economic influence over the United States. This criticism came despite the fact the majority of Unocal's production is headed to overseas markets and not U.S. consumers.

"There were some foreign policy hawks that suspect China is preparing for war against the United States and anything that assists in its economy is bad for the United States," Jerry Taylor, a senior fellow at the libertarian Cato Institute, told United Press International. "Others simply misunderstand oil markets and believe there will be less oil for the United States."

China, meanwhile, is devising its own plan to curb energy dependence. At the start of the year, President Hu Jintao called for the creation of an "energy-efficient, environmentally friendly society," but that may not be easy.

Energy consumption is expected to grow worldwide over the next 20 years by slightly less than 2 percent, but in developing countries such as China, that figure is likely to be nearer 3.2 percent. Similarly, energy consumption is expected to double in these countries by 2025.

As part of its policy, China has said it wants to reduce energy consumption per unit of gross domestic product -- energy intensity -- by 20 percent before 2010, a goal the World Bank has called "near-impossible."

Still, on Tuesday, the World Bank approved an $86.33 million loan to increase China's use of renewable energy. The money is earmarked for a large wind farm in Inner Mongolia Autonomous Region and to rehabilitate and develop selected small hydropower projects in Zhejiang Province.

Source: United Press International

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