The Iraq War V. the Int'l Energy Situation

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Last updated at: (Beijing Time) Thursday, April 10, 2003

The Iraq War V. the Int'l Energy Situation

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Since the outbreak of the Iraq War, people have generally been concerned about the impact of the war on the international energy situation. First, let's see what are the characteristics of the current energy situation, then we will come to analyze and judge what impact the war would bring on the international energy situation.

Over the past year or so, the world energy situation has experienced fairly big changes, with the following characteristics.

I. The prominent position of energy, principally petroleum, in international politics has become an important cause of various major international events of today, a fierce war of scrambling for petroleum is being fought among big countries. The United States has, in recent years, launched the Afghanistan War under the pretext of combating terrorism, US troops have entered Central Asia and Transcaucasia and set up military bases there, the US and British coalition forces have started the war against Iraq, France, Germany and Russia have opposed the US use of force against Iraq, etc. All these were done against the background of scrambling for oil to different extents. Superficially, the fight between big countries for oil is calm, but actually it has become white hot. The fight among them is manifested mainly in the following three aspects: First, striving for petroleum resources, second, contending for oil transport lines and third, scrambling for oil markets and oil price-setting rights. Oil has a great bearing on the life of various big countries. The United States is the largest oil consumption country in the world, its annual import of crude oil exceeds 500 million tons, accounting for over half of its oil demand. A suspension of foreign oil supply or rocketing oil price, if happened, will exert a serious, negative influence on the US economy. Russia is an important oil producer and oil exporter, its income from oil export makes up over 40 percent of its foreign exchange income and financial revenue. In recent years, Russia's sustained economic growth benefited from oil exports and high price of petroleum. Such being the case, oil holds an increasingly important position in the international politics and economy.

II. Various countries have changed to pursue a policy of diversity in oil export and oil introduction for their respective interests and security. In order to avoid the situation of excessive dependence on a certain country or certain countries for its oil exports, Russia has gradually pursued a policy of diversity of its oil exports. On its west, its main oil/gas customers are Germany and other European countries. To reduce its dependence on them, Russia has decided to export huge amounts of oil and gas to the United States and Turkey. In East Asia, it has not only planned to sell oil/gas to China, but also is prepared to sell these products to Japan and the Republic of Korea (ROK). The United States attaches great importance to the policy of diversity of oil import. In order to reduce its dependence on oil from the Middle East, it has gradually shifted its oil supplying places to North America, Latin America, Russia, Central Asia and West Africa.

III. Various countries are actively carrying out energy diplomacy in order to get oil/gas resources, transport lines and markets. Russia's energy diplomacy is particularly active, what is more, the diplomacy is often chaired by President Putin himself. Striving to be the "world's oil superpower", Russia has, besides energetically increasing output and expanding exports in recent years, adopted the following major moves in the aspect of energy diplomacy: Firstly, taking advantage of Russia's traditional influence on oil-producing countries in Central Asia and Transcaucasia and these countries' need to use the land of Russia for their export of oil and gas, Russia has, on the one hand, striven to get the oil/gas resources of these countries and, on the other hand, controlled the transportation of these countries' oil/gas exports. Secondly, although Russia is rich in oil and gas resources, it still energetically engages in outward expansion, purchases oil resource stock rights from Iraq, Iran and some other countries. Thirdly, it increases its oil/gas exports and expands Russia's share on the world oil/gas markets.

IV. The oil/gas concentration areas with better conditions in the world have almost all been divided up by international oil companies, oil and gas resources that can be exploited and introduced have been dwindling. Take the natural gas of Turkmenistan for example. Statistics show that the natural gas produced here in 2010 is expected to reach 120 billion cubic meters, and 100 billion cubic meters of which are for export. However, Russia had signed a contract with Turkmenistan as few years ago, under which it will purchase 50 billion cubic meters of natural gas from Turkmenistan in the short term, and 60 billion cubic meters in the future. .Last December, Turkmenistan, Afghanistan and Pakistan signed a contract, planning to lay a natural gas pipeline from Turkmenistan via Afghanistan to Pakistan, which can transfer 30 billion cubic meters of gas a year. In the same month, Bulgaria, Turkey, Romania, Hungary and Austria signed an agreement on building a natural gas pipeline from Central Asia to Europe, the amount of gas transferred will stand above the amount transferred through the Turkmenistan-Pakistan natural gas pipeline. Eighty percent of Middle East oilfield stocks have been taken away by Western oil companies, if other countries want to get upstream resources, they can only purchase from Western oil firms or purchase from resources countries to buy oilfields with poor condition and high cost. As a result, the upstream space for other countries to enter the oil/gas industries of resources countries is shrinking.

V. The unstable international oil market and rising oil price have brought negative effect on the economies of many countries. The formation of this situation is not the result of the function of supply-demand relationship, but is caused by political and military factors. In the past year, the Palestine-Israel conflicts, the Iraqi crisis, the Venezuelan labor disturbances and terrorist activities have led to soaring oil price, approaching US$40 per barrel before the outbreak of the Iraq War.

VI.International terrorism poses greater threat to international energy security, principally oil transport safety. Although their spearhead is directed mainly at the United States, they also constitute threat to the energy security of other countries.

The influence of the Iraq War on the international energy situation is also determined by the development and result of the war, as well as by whether the war can quickly end, and whether the situation in postwar Iraq and the Gulf region is stable, etc.

People worry that after toppling Saddam Hussein, the United States will obtain Iraq's rich oil resources, and will thus weaken and even undermine OPEC, control the world oil market, change the world oil pattern and remake the Middle East the most important oil supply place for the United States. I think it won't be a plain sailing for the United States to attain the above goal. In the future world energy market, even if the fight for oil will still be very fierce, the general situation will remain the coexistence of contention and cooperation.

By People's Daily Online

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