Time:2013/1/15

On January 7th 2013, the Center for International and Strategic Studies (CISS) of Peking University, in collaboration with the Sigur Center for Asian Studies of George Washington University (GWU), held a workshop to discuss energy security in Asia. Agenda.pdf  The event took place in the Lakeview Hotel at Peking University. The main purpose of the workshop was for authors of the Sigur Center’s “Energy and Transit Security in Asia and Eurasia” project to present their preliminary findings and receive feedback from Chinese experts. CISS identified invited discussants from China and facilitated the logistics of the workshop. A number of faculty and students attended as observers.

On behalf of CISS, Zha Daojiong of Peking University opened the workshop by extending a warm welcome to all workshop participants, before handing over to Deepa Ollapally and Mike Mochizuki, the co-principal investigators of the Sigur project. Making clear that the project was still in its early stages, they asked for frank feedback on the working papers.

Session I: Energy Markets in Asia 

In the first session, Robert Weiner of GWU discussed petroleum markets in Asia, focusing on the economic dimension of this issue. He began with a broad survey of milestone changes in the supply and demand scene in Asian energy. He noted that the US is getting closer to self-sufficiency and may become an oil and gas exporter over the next few years. Professor Weiner addressed the issue of resource nationalism, using this term to denote the efforts of resource-poor states to obtain access to energy abroad. He compared the number of investments in US upstream oil and gas made by China and Japan in recent years, and questioned the relationships between oil companies and the government. He finished by posing questions about Asian perspectives that resource investment abroad can positively contribute to their search for security of supply; US perspectives that foreign investment in host countries’ energy resources can threaten the latter’s economic security; and finally, the challenges for research and policy analysis.

The discussant for this session was Gao Shixian of the Energy Research Institute of the NDRC. He pointed out that China’s energy policy attracts far too much commentary from the West than that of other countries and stated that people should not be so sensitive about crude oil as a commodity in international trade. He conceded, however, that Chinese oil companies still have a lot to learn to deal with non-economic factors in their foreign operations. He also said that co-operation between Asian countries on the energy issue would bring benefit to all.

Subsequent discussion covered the role of the state in energy companies’ behavior, the peak oil argument, Canadian vs. American criteria for approving overseas investment in its upstream energy sector, and China’s objectives in overseas energy investments. One participant noted the lack of clarity in ascertaining the ’commercial’ vs. ‘strategic’ nature of cross-border energy project acquisitions and operations.

Session II: Energy Security in Japan and Korea

The topic of energy security in Japan was presented by Mike Mochizuki of GWU and Richard Samuels of MIT. Professor Mochizuki approached this topic from a theoretical-analytical perspective, focusing on ‘energy security’ in different country settings. He noted the dominance of the three schools of International Relations theories: realism, nationalism or globalism, which has led to the popularity of the concept of hedging and hugging in approaching energy relationships between states. In this presentation, Professor Mochizuki addressed three salient debates surrounding energy in Japan today: firstly, the nuclear energy debate, especially in the wake of the Fukushima nuclear accident in 2011; secondly, China – should Japan hug or hedge against China?; thirdly, the US, the possibility that it will lose interest in protecting Japan’s sea lanes in the future. Finally, Professor Mochizuki discussed the gap in views between politicians and the electorate, especially on the nuclear issue, which enjoys strong support from the Liberal Democratic Party of Japan, but considerable public skepticism. 

The discussant for the Japan session was Liu Xiaoli of the Energy Research Institute of the NDRC. Ms Liu gave some suggestions to the presenters to develop their article further, such as updating data about Japan’s energy statistics and adding a section on the future outlook of energy in Japan. She offered additional insights into China’s domestic oil and gas exploration and China-Japan energy ties.

The Q&A included questions about estimates of resources in the East China Sea, whether or not the security of sea lanes is included in the US-Japan peace treaty, as well as the prospects of joint development of the Diaoyu Islands. Professor Samuels replied saying that although the sea lanes are not included in the US-Japan peace treaty, US refusal to provide security would lead to the end of the alliance, unless a crisis was provoked by Japan. 

The second session continued with a presentation by Scott Synder of the Council on Foreign Relations on energy security in Korea. He discussed three cases: nuclear investment; discussions about North Korea; and the focus of the current administration on green growth. Firstly, in South Korea, the impact of the Fukushima nuclear accident in Japan on domestic Korean support for nuclear growth has been quite minimal, as there is no viable alternative. In addition, both progressive and conservative leaders have embraced the idea that energy security should be part of the solution to the North Korea issue. In terms of green growth, although Korea remains the worst performer in the OECD on renewables, Dr Synder believes that the current green growth strategy will continue. He also stated that maritime transit issues are coming onto the agenda in Korea and that the country recently filed a claim to part of the shelf in the East China Sea, which came as a surprise to both China and Japan, who saw the issue as a two-party dispute only.

The discussant on Korea was Jin Yingji of the Chinese Academy of Social Sciences. She gave Professor Synder various suggestions on his paper, such as including more on South Korea-China relations, clearly defining the different schools of thought, as well as including the role of various state agencies in Korean energy policy making. 

During the discussion, questions about transnational energy projects such as gas pipelines from Russia to Korea (via North Korea) and a northeast Asian power grid, as well as future developments of nuclear energy in South Korea, was raised. Dr Synder believes that the pipeline project would be a huge political risk and that North Korean transformation would probably be a prerequisite to the project taking place. 

Keynote Address

While enjoying lunch, participants were invited to listen to the keynote address, which was given by Mr. Zhang Yousheng, who was designated by Mr. Han Wenke, President of the Energy Research Institute of the NDRC due to an unexpected conflict of schedule. The keynote speech was divided into three main sections: a brief review of Sino-US energy cooperation; main obstacles to smoother cooperation; and a few suggestions on how to overcome those obstacles. Mr Zhang began by drawing attention to all that has been achieved thus far in Sino-US energy cooperation, with 34 government agreements to date. For the past three decades, the central agendas of energy cooperation between the two countries moved from basic science, to fossil fuel development, to clean energy development. He identified four areas of challenges. First, China is a developing country and its energy needs will continue to grow, whereas the United States is reaching a peak in energy consumption; thus the two sides have different domestic contexts for future interactions. Second, there are misunderstandings about China’s energy diplomacy, as there is no big difference in practices between the US and China. Third, there is mistrust about each other’s long-term intents. Fourth, the two sides have different concerns about technology; China would like to benefit from U.S. advances in energy technology while the U.S. is worried about Chinese competition. Mr Zhang offered several suggestions for overcoming these issues, such as setting up advisory mechanisms between the two governments for dealing with mutual energy concerns, and cooperation in addressing sudden spikes in world oil prices. 

Questions from the audience included China’s views of the International Energy Agency, how the shale gas revolution in the US will change US-China energy relations, whether or not there is scope for China and India to get involved in the global energy system, and the current size of the strategic petrol reserve in China. Mr. Zhang offered his thoughts on some of the issues and expressed concern about whether or not China can access U.S. oil to be exported, in addition to the possibility of U.S. interference in Chinese access to energy from third countries. 

Session III: Energy Security in India and Russia

The first session of the afternoon began with a presentation by Sudha Mahalingam of the Indian Petroleum and Natural Gas Regulatory Board and Deepa Ollapally of GWU. After briefly introducing India’s import-oriented energy policy, Ms Mahalingam discussed the two distinct schools of thought on three issues: gas pipelines from Iran and Central Asian origins, US-India nuclear cooperation and China factors. Although India is surrounded by gas-rich neighbors, gas pipelines have remained elusive and have divided Indian opinion. The India-US nuclear deal was presented to the Indian public as an energy security package, and although some are in favor of it for security reasons, Ms Mahalingam does not believe that nuclear energy is the way forward for India. As regards the China factor, Ms Mahalingam believes that where it suits, China and India will cooperate, and where not, they will compete. She also stated that Indian companies don’t have the autonomy or government support that Chinese companies enjoy. Deepa Ollapally added to this by saying that in India, energy security is, in part, being used to justify broader foreign policy objectives, such as naval expansion, as well as discussing the Indian perception of a Chinese “string of pearls” strategy.

The discussant for the India section was Zhao Gancheng of Shanghai Institutes for International Studies. Professor Zhao denied that China has a “string of pearls” strategy, and said that as China and India are both new to the international energy markets, the two countries need to explore more opportunities for cooperation. He raised questions about India’s decision in 2010 to raise import tariffs by 38% thus effectively undoing a contract for a Chinese power generation company to supply Indian companies. He also questioned why India followed U.S. demands with regard to curtailing import of Iranian oil, when the US doesn’t provide an alternative. Professor Zhao then offered some suggestions for strengthening the draft paper.

In the subsequent discussion, questions were raised as to why India needs a pretext for naval expansion, why the hard-core nationalists seem to be winning the debate in India and what Indian views on the Chinese expansion into the Indian Ocean are. The presenters answered that the rise of the hard nationalists is a very recent thing and it is still not certain that the soft nationalists won’t win out. 

The next presentation was on energy security in Russia, for which the presenters were Andrew Kuchins of the Center for Strategic and International Studies and Shoichi Itoh of the Institute for Energy Economics, Japan. Professor Kuchins began by stating that Russia is as an outlier in this project, as it is not often included within Asia and is a major energy exporter rather than an importer. The presentation was titled, “Déjà vu all over again?”, because Russia’s current Asia pivot is reminiscent of Russian Cold War policies. Dr Kuchins described Russia’s relationship with China as one of necessity as opposed to convenience, as some other scholars often opine. Mr Itoh then went on to discuss Russia’s oil/gas pipeline projects to the Pacific coast that are currently being carried out or planned for the future, saying that Russia may be overestimating its own leverage in Asia. Due to the potential competition to supply Asian consumer countries, he said that the timing and competitive pricing is very important and a domestic industry of value-added gas products in Russia needs to be designated. 

The discussant for the Russia paper was Mr. Zhang Jun of the China National Petroleum Corporation. After offering his general agreement with points made in the paper, he gave a few suggestions, such as including other Asian countries aside from China in the analysis. Mr Zhang also raised a few questions to the authors, including what Asian enterprises can do to get involved in Russian oil and gas projects and what the attitude of the Russian governments, central and local, are to such investments. 

The discussion focused on a wide range of issues in China-Russia energy relations. The question of Russia’s role in Asian energy security was also raised, now that the U.S. has more to offer. 

Session IV: Energy Security in China

The presenters for the fourth section were Robert Sutter of GWU and Zha Dajiong of Peking University. Professor Sutter claimed that the debate over oil is still a secondary debate in China, as China relies predominately on coal and non-fossils such as nuclear power and renewables, and the focus of China’s energy policy is on domestic supply and efficiency. He identified three groups important to energy policies in China: government decision-makers, media and elite commentators, and experts. He also outlined the views of the three schools: the nationalists seek self-reliance, are wary of others and have a zero-sum viewpoint on maritime issues; the globalists want to cooperate with other countries and focus on international markets; and the realists, a group to which many government officials belong, make cost-benefit analyses. One area on which the three schools agree is on conservation and reducing waste. On the issue of nuclear energy, China is following a prudent policy, with less growth in this sector that previously planned for. Overall, he believes that there is a muddled mix of influence in China’s energy policies, with no clear trajectory. 

Zha Dajiong stated that it is almost impossible to identify a truly authoritative Chinese perspective on energy security, as the predominant question is always whose interests get priority attention. He also claimed that in China there is an over-reliance on translated works about international energy politics, with too little factual understanding of how China has interacted with the rest of the world in the energy sphere. Professor Zha believes that if we were to identify one central theme applicable to all schools of thoughts, it would be the pursuit of autonomy from the rest of the world. He observed that such a sentiment is similar to that of Japanese experience from the 1960s till the early 2000s. This means that there is broad support for Chinese activism in energy asset development, in both domestic and international realms. With regard to nuclear power, Professor Zha commented upon Chinese interest in seeing the success of the 4th generation nuclear power reactor, currently under construction and with intellectual property rights held by Chinese designers. He also discussed how the US is often used as a scapegoat to justify resistance to reform in domestic energy policies. 

The discussant, Professor Wang Zhen from the China University of Petroleum spoke of the different stakeholders in China, whose ideas hold different weight in energy policy making and execution. He also suggested that the presenters should include a bit more background about China’s energy policy practices. Other participants raised issues and suggestions, such as whether or not autonomy is attainable in the world of energy, wisdom in treating coal as the most important energy source in China and subsidies given to energy industries and consumers.

Session V: Implications for US Foreign Policy and Prospects for US-Asia Relations

The three panellists for the final session of the workshop were Charles Glaser of GWU, Robert Sutter and Zha Daojiong. Charles Glaser first introduced the three different definitions of energy security: the energy needs and price considerations of a state; how vulnerable a country is to disruptions; and the conflict or national security dimension. He believes that although US production of its own oil will insulate the US from the world markets to some extent, if global oil prices go up, this will continue to affect the US economy. He also discussed the implications for the US in terms of its grand strategy and questioned how far the US reach as a security provider should extend. Although some in the US tend to see the Chinese military buildup as unprovoked, he emphasized the potential for misunderstandings on both sides. He believes that the solutions to these problems must be political and not military.

Professor Zha expressed his serious doubt that energy is a driving rationale behind China’s island and maritime disputes with its neighbors or whether current disputes will lead to armed conflicts. For one thing, there is a deep and mutually dependent energy trade relationship between China and Japan and Southeast Asian countries. He observed that too often researchers focus exclusively on crude oil alone and ignore the importance of trade in oil products. Hence, there are domestic forces against going too far in territorial disputes, in all countries. He offered several suggestions for further research, such as trying to see if the US and China can start trading in liquefied natural gas, trying to facilitate the export of more coal from the US to China, and allowing more international competition in the domestic Chinese energy markets. Professor Zha said that serious Chinese interest in deeper engagement in global energy governance mechanisms is still lacking, but that academics could help to change the situation.

Robert Sutter does not believe US-China relations are in trouble, as there are now a huge number of bilateral dialogues, the Taiwan issue has improved greatly in recent years and there appears to be a higher level of mutual trust. As both sides are preoccupied with other issues, the last thing that they want to do is argue with one another. However, a certain level of uncertainty remains, for example on the South China Sea issue. 

The subsequent discussion included questions about whether it would be realistic for the US to share responsibility of ensuring global and regional energy security with other countries, for example in the maritime transit security domain. The discussion also touched upon forces behind the fluctuation of world oil prices. Several participants shared Professor Sutter’s optimistic outlook on current and future US-China relations. 

To conclude the workshop, Professors Zha and Ollapally and Mochizuki all expressed satisfaction with the quality of the discussions and thanked CISS staff members for their logistical support.