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COMMENTARY
October 20, 2001
Oil in Shanghai
There is a constant natural conflict in life between what is important and what is urgent. Landing in Shanghai President George W. Bush turned immediately to several pressing issues. The Asia-Pacific Economic Co-operation summit which he has been attending was never designed as an alliance against terrorists. It has its own important long-term goals but for the moment it has had to serve as the venue for urgent face-to-face big-power diplomacy. As I wrote Tuesday the immediate issue to be settled at Shanghai was Where stands China? Will it be part of the Western coalition against terrorism essentially neutral or essentially opposed. The answer that emerged yesterday was essentially neutral -- but trending towards greater and greater commitment as it absorbs the magnitude of present world dangers. A great deal of optimistic chaff has recently been written about this "new spirit of co-operation" by the West's "China experts". I cannot take them seriously because they persist in analyzing China in terms of political constituencies as if its president Jiang Zemin were a bourgeois politician catering to them. But despite its substantial economic liberalization China's power structure remains that of a totalitarian dictatorship in which there can be only one constituency. Notwithstanding Presidents Bush and Jiang agreed to forget about the spy-plane incident from last spring and to abandon some mutually hostile vocabulary. The media have noticed that Mr. Bush no longer calls China a "strategic competitor"; equally Chinese officials have dropped the use of ritual phrases including "American hegemony" and "gunboat diplomacy". They have developed a (possibly unconscious) obsession with the word opportunities . Another bandied phrase is cautious support . What this means for the present translated into common English is they will only try to sabotage us if they feel absolutely sure they can get away with it. Otherwise they'll just watch us play sometimes feebly applauding and fetch the occasional ball that rolls off the field. Whereas the Russians will be more than happy to kick it into our opponent's net (and will of course want full credit for this). China has agreed at least in principle to help with intelligence and by investigating Islamist financial networks under Chinese oversight. President Jiang has probably secretly agreed to wash his hands of mischievous commitments made to aid Afghanistan with advanced communications and other technology; but those projects were anyway obviated by the U.S. air strikes. Given the threat of Islamist infiltration into China's own Muslim-inhabited territories it makes sense for them to switch policies. Instead of trying any longer to buy off their own external Islamist enemy they will now happily watch the U.S. and friends destroy it for them. But the contrast between Washington's new relationships respectively with Moscow and Beijing was as clear as the body language in Shanghai. Presidents Bush and Vladimir Putin are downright demonstrative in greeting each other; whereas Presidents Jiang and Bush are a study in formal cordiality; Mr. Bush in particular looking focused businesslike intense. Moreover most of the positive things the Western media were attributing to Mr. Jiang were in fact put in his mouth by the U.S. president speaking in English beside him. Mr. Jiang characteristically ducked questions that obliged him to repeat these things. In the background an ugly event belied the new Chinese openness. The delegation from Taiwan which is one of APEC's 21 members was absent because the Chinese had denied entry to Li Yuan-zu their chief envoy after a week of wrangling. This was behaviour of the "same old China". Characteristically President Bush has been giving nothing away. Even on the vexed human rights question he publicly reminded the Chinese that the battle against terrorism must never be an excuse to persecute minorities. This was a pointed reference to the present execution mania against supposed Muslim separatists in Chinese Xinjiang. He also repeated the U.S. intention to proceed with anti-missile defences. After media speculation that it would be compromised it has instead been fast-tracked in the last week. On the other hand the U.S. now seems to accept that a Chinese nuclear build-up is inevitable. Perhaps the nicest touch was when President Jiang got to practice his colloquial English. For when Mr. Bush was formally promising to reschedule the state visit to Beijing that had to be cut out of this trip Mr. Jiang interrupted his translator to say: "No problem. Next time." The tone generally was cheerful. * * * * * This was all on the surface and urgent. But behind the scenes I believe a much more important conversation was beginning that will develop initially out of the public eye. The issue is the international oil supply so much of which comes from the Gulf area in the Middle East. If as is entirely possible over the coming months or years the whole area goes up in flames the event could trigger an international economic disaster. Even without such a catastrophe recent events have made clear that the West can no longer afford to be held to ransom by venal Arab regimes themselves under both internal and external pressure from the rip-tide of Islamist fanaticism. For the careful removal of the "oil card" would change the dynamic between West and Middle East -- dramatically in the West's favour. It would also misfortunately return the whole oil-rich region with its exploding population base to the penury in which it existed before the Western oil companies first began to drill. For the entire economy of each country in the region remains a stack of cards precariously leaning on this giant "oil card" -- the huge mostly unearned revenues from the sale of oil to Western and Far Eastern markets. From a longer-term strategic perspective if it should prove impossible to open the region to modernity and the rule of law the only alternative will be to close it entirely. For the hard fact is that a destitute Saudi Arabia would cease to be the chief source of cash for international Islamist terrorism. The United States and Canada are much less dependent on Middle Eastern oil than are most of the countries of Europe. But the real exposure is in Japan Taiwan and South Korea. These vital Western allies -- all of them now flourishing multi-party democracies -- depend for their economic existence on energy in the form of Gulf oil. And instability in Indonesia threatens their only present alternative supply. The oil price has been falling since Sept. 11. Paradoxically this is because tensions in the region have made Saudi Arabia and other major producers extremely cautious. They do not dare to persist with the cartel practices that they resumed to raise the oil price late last year (disastrously just as world economic growth rates began to fall). These were anyway being undermined by a Russia which with a desperate budgetary shortfall was opening all its taps. Moreover Iraq the second-largest oil producer after Saudi Arabia has quietly returned to full production after interruptions that lasted almost a decade; and the West has been winking at this. Finally the international economic downturn has relieved short-term demand for oil accelerating the decline in prices. But all of this could be changed in an instant by a major blow-up in the Middle East on top of the oil fields. And with Palestine Jordan Syria Iraq Iran and finally Saudi Arabia itself all candidate starting points for just such a blow-up it is impossible to take the low oil price for granted. Now I am speculating but on the basis of a great deal of available information. I believe the Bush administration is now inclined to take a grand view of international energy -- one that goes considerably beyond the new domestic exploration promised in Mr. Bush's election campaign. Moreover the present international crisis has created an opportunity for the coalescence of both prospecting and conservation points of view. For both will be crucially necessary if the democratic nations are to be quickly disengaged from their dangerous dependency on Gulf oil. As a former oil man himself President Bush is peculiarly well placed to grasp the particulars. As a politician atop what amounts to a temporarily unified bipartisan consensus to defend America regardless of cost he is looking for ways to prolong that consensus. His mind consistently reaches for opportunities to "combine opposites" -- and his whole political career to date has been predicated on his remarkable ability to forge bipartisan agreements. All his rhetoric runs naturally this way. This is the man who ascended to power on the phrase compassionate conservatism . I believe President Bush is now seeking the support of a very broad domestic and international coalition to pursue long-term energy security in a systematic way. The time is anyway ripe for it not only negatively in view of the threat but positively in view of new opportunities. It may even be possible to concede such controversial plans as those for wilderness Alaska to the environmentalists because there are so many other directions to turn. Thanks to new exploration and extraction technologies British Petroleum and other multinational oil companies are now able to drill safely to much greater offshore depths in such vast oilfields as those under the Gulf of Mexico. New technologies have helped Canada's Suncor to drive production costs sharply down in our own tar sands. These latter represent a reserve on a scale larger than the whole Middle East and may themselves be exceeded by tar sand deposits under the Orinoco delta of Venezuela. Canadian offshore resources are now coming onstream and the regulatory climate is rapidly evolving for conventional oil and gas developments in landward Mexico. Parallel developments are happening throughout the hemisphere in natural gas liquifaction. For Europe and possibly the Far East the huge oil and gas fields of eastern Siberia are coming onstream; and the war in Afghanistan alone has settled the routes of future pipeline projects that will avoid the Middle East entirely. The Caspian oil patch is also now likely to feed into new pipeline systems through Russia and Turkey to Europe. But from "the other side" we are now harvesting earlier technological advances in renewable energy. The cost of producing electricity from wind power has now dropped into range with hydro fuel-burning and other sources. And likewise the cost of solar power has dropped so that we now see the multinationals diversifying into the manufacture of solar panels on a very large scale. Toronto's Automation Tooling Systems is among the companies at the forefront of this field selling both to Europe and the Far East. Finally North America has only scratched the surface in oil conservation at a time when technology has made "synergy" between energy and environment almost as inevitable as it is desirable. I would not in the least be surprised to find President Bush soon leading the charge for a bigger and better "Kyoto agreement" -- and would imagine he has been testing this out on the heads of government assembled at Shanghai. David Warren
© Ottawa Citizen
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