legs to walk”—one, to further development of the domestic industry; the other, for international expansion.
Today the impact of the “go out” strategy is evident worldwide. Chinese oil companies are active throughout Africa and Latin America (as are Chinese companies from other sectors). Closer to home they have acquired significant petroleum assets in neighboring Kazakhstan and have achieved some positions in Russia after repeated tries. They are developing natural gas in Turkmenistan. As latecomers into the international industry, the Chinese come equipped not only with oil field skills but a willingness and the financial resources to pay a premium to get into the game. Also, particularly in Africa, they make themselves partners of choice with very significant “value added.” That is, they bring government-funded development packages—helping to build railroads, harbors, and roads—something that is not in the tool kit of traditional Western companies. This has engendered controversy. Critics charge that China is colonizing Africa and using Chinese rather than local labor. Chinese reply that they are doing much to create markets for African commodity exports, and that export earnings are better than foreign aid and do more to stimulate lasting economic growth. (Some of these packages have fallen apart.) Chinese banks, in coordination with the Chinese oil companies, have also made multibillion-dollar loans to a number of countries that will be paid back in the form of oil or gas over a number of years. (One such deal took fifteen years to work out. )15
The energy security strategy is also taking an obvious route—building pipelines to diversify, reduce dependence on sea-lanes, and strengthen connections with supplier countries. A new set of pipelines, built in record time, brings oil and gas from Turkmenistan and Kazakhstan to China. Russia’s $22 billion East Siberia–Pacific Ocean Pipeline will, in addition to supplying oil to the Pacific (Japan and Korea primarily), also deliver Russian oil to China—guaranteed by a $25 billion loan that China advanced to Russia. In September 2010 Chinese president Hu Jintao and Russian president Dmitry Medvedev jointly pushed the button to start the flow of oil over the Russian-Chinese border. The potential for a large trade in natural gas was also hailed. At the ceremony, Hu proclaimed a “new start” in Chinese-Russian relations. A relationship that was once based upon Marx and Lenin was now rooted in oil and possibly gas. 16
“LIKE THROWING A MATCH”
But the greatest controversy over the “go out” strategy came not in Africa but in the United States. In 2005 Chevron and CNOOC—Chinese National Offshore Oil Corporation—were locked in a battle royal to acquire the large U.S. independent company Unocal, which had significant oil and gas production in Thailand and Indonesia but also had some in the Gulf of Mexico. The competition between the two companies was very tough, with sharp arguments about the financial terms and the role of Chinese financial institutions, as well as the timing of the respective offers. For some in Beijing, a global takeover battle was not only unfamiliar but disconcerting. The price that CNOOC put on the table was greater than the entire cost of the huge Three Gorges Dam project, which had taken decades to build. After months of battle, Chevron emerged victorious with a $17.3 billion bid.
But in the course of takeover battle, a fiery political controversy erupted in Washington that was out of scale compared with the issues. After all, Unocal’s entire production in the United States amounted to just 1 percent of the total U.S. output. Much of it was in the Gulf of Mexico, in joint ventures with other companies, and the only market for that output was the United States. Yet when the contest got to Washington, as one of the American participants said, it was “like throwing a match into a room filled with gasoline.” For it became the focus of a firestorm of anti-Chinese sentiment on Capitol Hill that was already supercharged by the contentious hot-button issues of trade, currencies, and jobs. The heated rhetoric showed the intensity, at least in some quarters, of suspicions of China’s motives and methods. One critic told a congressional committee that CNOOC’s bid fit “into a pattern” of “activity around the globe” that is “ominous in its implication.” Another charged that CNOOC’s bid was part of China’s strategy for “domination of energy markets and of the Western Pacific.” Whatever the specifics of the takeover battle, the takeaway for the Chinese at the end of the political battle was that the United States itself was less hospitable to the openness