In China's oil quest, no deal is too unsavory

Mutual suspicion
Tensions over oil resources reflect the larger distrust between the sole superpower and the rapidly rising China.

In Washington, there is anxiety that China's national oil companies are driven more by political concerns than by commercial concerns, and are using state resources to overbid on oil interests and "lock up" resources around the world.

"They do serve national interests — national motives rather than commercial motives," said  June Teufel Dreyer, a professor of Chinese politics at the University of Miami. "Our companies are responsible to shareholders."

At no time was the bilateral distrust so evident as last year when China's state-owned CNOOC bid $18.5 billion to take over U.S. oil company Unocal.

Many lawmakers warned that the Chinese purchase had ominous implications for U.S. energy security, and were furious that the Bush administration had not allowed greater scrutiny of the deal. The uproar prompted CNOOC to withdraw its bid, but reinforced the notion in Beijing that the United States is trying to limit China's access to needed resources.

Meantime, China is pursuing a large number of oil and gas pipeline deals with its neighbors. Most important to Beijing is to finalize a deal with Moscow to build an oil pipeline from Siberia to China's northeast city of Daqing. These arrangements would help China ease dependence on Middle Eastern oil and avoid transport by sea lanes that are controlled by the U.S. military.

Forced embrace
While the pursuit of oil is driving a wedge between the nations on some fronts, it is also forcing them together, in efforts aimed at averting a collision over world resources.

In a nod to the building frictions, Washington and Beijing set up extensive bilateral energy talks between the Department of Energy and its Chinese counterparts in 2004, with discussion on ways of increasing energy efficiency in China, cleaner coal technology and reforming the power sector.

In this and other forums, China has been pursuaded to set up a strategic petroleum reserve to hedge against supply disruptions and emergencies.

Although cooperation will be key to averting conflict, the underlying distrust is likely to persist, says University of Miami's Teufel Dreyer in a new paper on China's energy sector:

"Just as many Chinese are concerned that Washington uses a desire to establish democracy to disguise its desire for hegemony and many Americans believe that Beijing talks about a China that is peacefully rising while providing its military with unjustifiably large annual budget increases, each side worries that gestures of cooperation may disguise an intent to block oil supplies to the other."

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