How the Iraq War has changed China's Oil Policy

The Washington Post has an article out today on how China's move into Latin America and Africa and elsewhere in search of oil was triggered by the Iraq War.

Through cultivation of Saddam Hussein's government, China sought to develop some of Iraq's more promising reserves. Beijing advocated lifting the United Nations sanctions that prevented investment in Iraq's oil patch and limited sales of its production.

Then the United States went to war in Iraq in 2003, wiping out China's stakes. The war and its aftermath have reshaped China's basic conception of the geopolitics of oil and added urgency to its mission to lessen dependence on Middle East supplies. It has reinforced China's fears that it is locked in a zero-sum contest for energy with the world's lone superpower, prompting Beijing to intensify its search for new sources, international relations and energy experts say.

It seems that there is no aspect of our foreign policy untouched by that suicidally stupid war in Iraq. Not only did we alienate our allies, we have also spurred our competitors to expand their reach into areas where we previously had great influence. You have to give the Bush Administration credit; when they screw up, they don't do things by halves.

One interesting and related story is that China's energy demand may actually be falling. The International Herald Tribune reports:

The International Energy Agency on Wednesday lowered its estimate of global oil demand this year, citing a sudden drop in Chinese consumption.

After growing 11 percent in 2003 and 15.4 percent last year, China reported its oil use dropped by 1 percent in the second quarter of this year from a year earlier, the agency said.

The drop is the latest in a series of unclear and often conflicting indications about whether the Chinese economy is still growing strongly.

The report that there are several possible explanations:

These include the possibility that the entire Chinese economy is starting to slow, that China is generating more of its electricity from coal instead of oil, and that China is improving energy conservation in response to higher prices.

The Far Eastern Economic Review also has an overview of China's energy issues this month.

[China]