Energy: The catalyst for conflict

by Chietigj Bajpaee

Numerous recent and seemingly unconnected events have highlighted the emerging fulcrums of potential alliances in Asia, as well as the possible focal points of conflict.
First, Chinese energy company CNOOC (China National Offshore Oil Corporation) has failed in its bid to acquire US energy company Unocal, even though it made a higher bid and offered better terms than its rival Chevron. At the same time, Indian Prime Minister Manmohan Singh during a visit to the United States was given a grand welcome and promised assistance on its civilian nuclear power program, even though India is not a signatory to the nuclear Non-Proliferation Treaty (NPT) and was frowned on for its nuclear tests in 1998.

In other words, while the US stifles China's attempts to meet its energy security needs it has promised to assist India in meeting its needs. It should be noted that had the CNOOC-Unocal deal succeeded, a Chinese energy company would now have its hands on energy assets in close proximity to India.
For example, Unocal has significant operations in Myanmar and Bangladesh, and in the 1990s it was involved in negotiating the Trans-Afghan Pipeline (TAP) from the gas fields of Turkmenistan through Afghanistan to Pakistan. India has a significant interest in these operations.

Second, at the 60th anniversary of the end of World War II, while the European powers held joint memorials, the East Asian powers held separate memorials with each country choosing selectively remembered events. While Japan focused on the devastation of the atomic bombs on Hiroshima and Nagasaki, China focused on its humiliation by Japanese troops during such events as the Nanjing Massacre.
Historical animosities have been further enflamed by recent events. These include South Korea and China's opposition to Japan's bid for a permanent seat on the UN Security Council due to visits by Japanese Prime Minister Junichiro Kozumi to the Yasakuni Shrine and Japan's republishing of a history textbook that whitewashes Japanese wartime atrocities. Tensions have also been fuelled by a territorial dispute between South Korea and Japan over the Takeshima/Tokdo islets, and between China and Japan over the demarcation of the East China Sea.

Third, Russia and China held unprecedented joint military exercises this month. Entitled "Peace Mission 2005" and comprising of 7,000 mainland troops and 1,800 Russian forces, the exercises have come under the framework of the Shanghai Cooperation Organization (SCO) with the intention to prepare for intervention in a state overcome by ethnic conflict. While claiming that the war games were not targeted at any third party, they were held in the Shandong peninsula and the Yellow Sea, in close proximity to Japan, Taiwan and the Korean peninsula.
The exercises included a naval landing, which is unusual given that they come under the SCO framework, which would imply involvement in landlocked Central Asia. Furthermore, the US was not invited to observe the exercises although the four other SCO members (Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan) along with SCO observer states, India, Iran, Mongolia and Pakistan, were.

Growing Sino-Russian military cooperation comes in the context of China and Russia's confrontational relations with Japan and the US. While Russia has approved the construction of a Japanese-backed oil pipeline from Taishet to the pacific port of Nakhodka, it has hinted that it will build a branch from the pipeline to Daqing in China's northeast Heilongjiang province before completion of the Japanese-backed route.
This change of plan has been fuelled by Russia's growing frustration with Japan's unwillingness to compromise on a decades-old territorial dispute over the Southern Kurils/ Northern Territories and Kozumi's aggressive posturing, as seen with him sailing around the disputed islands last September.

Meanwhile, China and Russia under the aegis of the SCO have also demanded that the US set a deadline for withdrawing its bases from Central Asia as the situation in Afghanistan stabilizes. This comes in the context of growing concern over the US-backed "coloured" revolutions in Georgia, Ukraine and Kyrgyzstan.
Soon after the SCO statement, Uzbek President Islam Karimov gave the US 180 days to withdraw its forces from the Karshi-Khanabad (K2) airbase. Unsurprisingly, Uzbekistan's ultimatum followed its suppression of the Andjian uprising in May, which the US and other Western powers condemned and China and Russia commended, as seen by Karimov's visit to Beijing two weeks after the uprising.

Sino-US tensions have also flared over a series of provocative statements by officials on both sides. On the Chinese side, Major-General Zhu Chenghu in a speech at the Hong Kong Foreign Correspondents Club in mid-July stated that China would initiate a nuclear first-strike on the US if it were to intervene in a conflict over Taiwan.
Whether this statement was made in a personal capacity as the Chinese government claims or as an attempt by the central government to test international reaction will only be verified in the coming months when it is established if Zhu has been censured or promoted for his statement.

On the US side, Secretary of Defence Donald Rumsfeld has made numerous remarks warning of China's growing military capability. Recently, he stated that China's growing military expenditure was out of step with its claims of "peaceful emergence".
This statement was made in the context of a US Defence Department report in July, which cited China's growing military modernization as tilting the military balance in the Taiwan Strait and undermining long-term stability in the region. The US and Japan also issued a joint statement in February, which identified the Sino-Taiwan dispute as a mutual security concern.

Finally, South Korea is growing increasingly estranged from Japan and the US due to its softer approach in dealing with North Korea's nuclear ambitions. This was seen recently with Unification Minister Chang Dong-young stating that Pyongyang had the right to a peaceful nuclear energy program, while the top US negotiator at the six-party talks, Christopher Hill, has stated that light water reactors are unnecessary to meet the North's energy needs.
Seoul's increasingly conciliatory stance with Pyongyang has been fuelled by a shift in power from the vehemently anti-communist Grand National Party (GNP) to President Roh Moo-hyun's ruling left-of centre Uri Party. Coupled with South Korea's attempts to access energy resources in Russia and Central Asia and the territorial dispute with Japan over the Takeshima/Tokdo islets, there are hints of a shift in South Korea's international relations from the US-Japanese camp towards the Sino-Russian camp.

Players hedging their bets
At present there are no clear alliances in Asia. Instead, there are numerous permutations and combinations of alliances that may be formed. All sides are hedging their bets and preparing for every possibility.
China and the US have recently initiated a strategic dialogue and both states along with India, Australia, Japan and South Korea have established an energy partnership known as the Asia-Pacific Partnership on Clean Development. China has also played a vital role in brokering the six-party talks on North Korea's nuclear program, although its neutrality in the dispute is questionable.

While Russia and China have a strategic partnership in the military sphere, both states still have stronger trade and investment relations with the US than with each other. Russia is also weary of the demographic imbalances created by the encroachment of China's population into its sparsely populated far eastern territory. There are also limits on the level of Sino-Russian military cooperation -- while both states may engage in joint intervention in Central Asia, Russia is unlikely to intervene in a conflict over Taiwan, just as China is unlikely to get involved in Chechnya.
While US-India relations have shown considerable improvement under the Bush administration, India opposes US unilateralism, including its policy on Iraq and support for Pakistan's military dictatorship. Meanwhile, the US opposes India's plans to strengthen energy cooperation with Iran with a gas pipeline from Iran to India traversing through Pakistani territory.

Sino-Indian energy cooperation has also increased, with both states holding a stake in the development of the Yahavaran oil field in Iran and the Greater Nile Oil Project in Sudan, as well as China Gas Holdings establishing an alliance with India's largest energy conglomerate, GAIL (Gas Authority of India Limited).
Growing bilateral trade, cooperation in the G33 block at the World Trade Organization and China's recognition of Sikkim as a part of India as quid pro quo for India's recognition of Tibet as a part of China are further evidence of a rapprochement in Sino-Indian relations.

Finally, India's observer status at the SCO coupled with China and India's dependence on Russian military hardware and energy resources revive the ideaof a strategic triangle between India, China and Russia.
Some have even hinted at a Sino-Japanese-Indian alliance -- a sort of grand Asian alliance. While unlikely given the high level of mistrust between China and Japan, it is not impossible given the unprecedented trade and investment interdependence between the three states -- China is India and Japan's second largest trading partner after the US.

Nevertheless, certain combinations are more likely than others. In all likelihood, China and Russia will grow closer as will Japan and the US. Apart from disputes over Taiwan, China's exchange rate, quotas on Chinese-made textiles, intellectual property rights infringements and China's human rights record, the US is growing increasingly frustrated with China's relations with dictatorial regimes, including Robert Mugabe in Zimbabwe, King Gyandera in Nepal and Islam Karimov in Uzbekistan, as well as support for "rogue" or anti-US regimes such as Myanmar, Iran, Sudan and Venezuela. Russia and China have also opposed US unilateralism on the world stage.
India and South Korea are sitting on the fence and could go either way depending on how events play themselves out. For example, Chinese support for Pakistani aggression could put India on the side of the US against China, while aggressive and unilateral military action by the US could solidify an Asian alliance.

The current Sino-Indian rapprochement could also be unravelled by a flare-up over their territorial disputes in Aksai China and Arunachel Pradesh, energy competition on the world stage and China's encroachment into India's "sphere of influence" as seen by its improving relations with Bangladesh, Nepal and Sri Lanka, attempts to join the South Asian Association for Regional Cooperation (SAARC) and growing naval presence in the Indian Ocean.
Meanwhile, an increasingly active Japanese military could push South Korea towards China, while Chinese military aggression could push South Korea closer to the Japan-US alliance. Internal South Korean politics and events in North Korea in terms of the humanitarian situation, political stability and military posturing would also be relevant in determining the future direction of South Korea in the Asia-Pacific region.

Energy competition reveals the stages of confrontation
While Asian alliances remain in a state of flux, the stages of competition and confrontation are growing increasingly clear. All the major Asian powers are significant energy consumers and importers with the US, China, Japan, South Korea and India being the first, second, third, fourth and sixth-largest energy consumers respectively. Thus, energy competition will determine the stages of future confrontation and conflict in Asia.
One potential stage of conflict is the sea lanes of Asia, which include the East and South China Sea, the Malacca Strait and Hormuz and the Indian and Pacific Oceans. These are not only vital as transit points for energy shipments (e.g. half of the world's oil transits through the Malacca Strait) but also as potential sources of energy resources (e.g. territorial disputes in the potentially energy-rich East and South China Seas).

Apart from facing the threat of a blockade in the case of an inter-state conflict, the sea lanes are also vulnerable as targets for piracy and maritime terrorism. The Malacca Strait for example, experiences 40 % of the world's piracy. India, Japan, China and the US have all expressed interest in increasing their role in ensuring the security of the strait, although Indonesia and Malaysia have been reluctant to allow external involvement in the region.
Each state is attempting to address these threats in their own way. For example, China is trying to strengthen its blue-water naval capability as rumours of it building or buying an aircraft carrier have attested. It is also financing ports in Pakistan (Gwader) and Myanmar (Sittwe) to bypass chokepoints in the case of conflicts. China has also leased Myanmar's Coco islands, which are in close proximity to India's Andaman-Nicobar islands and the Malacca Strait and the Bay of Bengal. It has also engaged in open military posturing over its territorial dispute with Japan over the East China Sea, as seen last November when a Chinese nuclear-powered submarine encroached into Japanese waters off the Okinawa islands.

Another potential stage of conflict is Central Asia where the "New Great Game" is in full swing as states and non-state actors compete for energy resources and strategic influence. Recently, China National Petroleum Corporation (CNPC) and India's ONGC Mittal Energy (OME), a consortium comprising of the Oil and Natural Gas Corporation (ONGC) and Mittal Group competing for Canadian oil company, PetroKazakhstan.
An oil pipeline from Atasu in north-western Kazakhstan to Alashankou in China's Xinjinag province is due to be completed in December, and in May China concluded a $ 600-mm joint venture deal to develop Uzbekistan's oil fields. China's Tarim Basin to Shanghai (west-to-east) gas pipeline, which came online last year could also potentially be extended to Kazakhstan and Turkmenistan and even further to Iran and the Caspian Sea.

Meanwhile, Iran and India have agreed to jointly develop the Iranian port at Chahbahar as well as the road linking the port to Afghanistan and Central Asia, with India having exclusive rights to the port. With the removal of the Taliban regime from Afghanistan, the US-backed Turkmenistan-Afghanistan-Pakistan (TAP) or Trans-Afghan pipeline is also back on the table and with an improvement in India-Pakistan relations, the pipeline could potentially be extended to India.
Finally, the US is attempting to undermine the Russian monopoly on oil and gas pipelines from Central Asia to the west with the inauguration of the Baku-Tbilisi-Ceyhan pipeline in May.

In the military sphere all the major players in the "New Great Game" have some form of military presence in the region. As Karimov ordered the US to withdraw its military presence from Uzbekistan, US Secretary of Defence DonaldRumsfeld visited Central Asia to ensure that the US presence at Manas airbase in Kyrgyzstan and over flight rights in Tajikistan remained.
Russia has also reasserted its presence in Central Asia under President Vladimir Putin, with a permanent military presence in Tajikistan since its 1992-7 civil war as well as at Kant airbase in Kyrgyzstan.

In an attempt to contain the "three evils" of extremism, terrorism and fundamentalism China, operating under the aegis of the SCO, has established an anti-terror centre in Tashkent, Uzbekistan and engaged in counter-terrorism exercises in Kyrgyzstan in 2002 and Kazakhstan in 2003. India has allegedly established a military and medical facility in Tajikistan.
Apart from military influence, the players are also attempting to exercise "soft" power influence in the region, including historical links (as in the case of India and Russia), religious links (as in the case of Saudi Arabia and Pakistan), cultural links (in the case of Turkey and Iran) and economic links(in the case of the US, South Korea and Japan).

Return of power politics
The international system is in a state of flux. Contrary to many strategists, we are not at the end of history. Rather, we have come full circle. The players, technologies and motives may have changed but the disputes are now fuelled by primordial loyalties and basic needs, such as energy resources. Right now oil is the primary catalyst for conflict but other resources such as natural gas or water may soon play just as prominent a role.
In these new conflicts states still play a decisive role. The view that states are becoming increasingly irrelevant is incorrect. While non-governmental organizations, multinational companies and civil society are becoming increasingly important players, they are not supplanting states.

States still hold a clear monopoly on the use of force. While terrorist organizations challenge this monopoly, most groups have nowhere near the capabilities of states and often rely on the backing of states in the form of funding, arms, training and sanctuaries. Thus, the conflict scenarios with the most destructive potential involve states either engaged in conflict with each other or non-state actors.
Asia faces the volatile combination of a number of states with historical rivalries growing increasingly bold on the world stage as a result of their increasing economic prosperity and defence budgets, a rediscovery of their identities, and increasing dependence on imported energy resources. Power blocks are gradually coalescing around shared interests. At present the fulcrums of these power blocks could swing in a number of directions. The real threat will emerge when there is a solidification of these alliances.

Chietigj Bajpaee is an Asia analyst. He has been a researcher for civic exchange, a Hong Kong-based public policy think-tank and for the London-based International Institute for Strategic Studies and a risk analyst for a New York-based risk management company. He has a graduate degree in international relations from the London School of Economics and an undergraduate degree in economics and government from Wesleyan and Oxford universities. His areas of interest include energy security and political, economic and security developments in the Asia-Pacific region. He can be contacted at c.bajpaee-alumni@lse.ac.uk.