Just yesterday, Tom Barnett wrote a post at his blog titled "China, the unprincipled SysAdmin, willing to invest anywhere, actually helps our strategic interests." The thrust of the post can be found a few lines down where Tom puts forth:
"People don't want to hear this, but China's investment presence inside the Gap limits our liability there. The Chinese "unilaterally" engage in SysAdmin just like we unilaterally engage in Leviathan work. Each side limits the other's liability. We just don't recognize yet the symbiotic nature of this relationship.
"China brags that it doesn't "foist" its models on anyone, but of course it does. By taking such a mercantilist approach to the Gap, it fosters pale versions of itself--bread before circuses, or economics before politics. But it does this so narrowly that the legacy of Chinese trade is wealth, but not development. Notice the two booms at work in Sudan: oil and real estate. Which of those two lasts? Which empowers Sudanese to any appreciable degree?"
With this post fresh on my mind, my eyes zeroed in on the following news item via the China Economic Review's daily update:
A US$1.2 billion oil deal between China and Iraq may be coming back to life. Officials plan to met in November to renegotiate an agreement over the al-Ahdab field first discussed with Saddam Hussein's government in 1997, AP reported, quoting Iraqi Oil Minister Hussain al-Shahristani. China National Petroleum Corp signed the deal with Hussein in the midst of US sanctions that barred direct dealings with Iraq's oil industry and Beijing was waiting for them to end when the US invaded in 2003. Although western companies were widely touted as being favoured for deals under the new regime, the country's instability is putting many of them off.
This is a very interesting development indeed. Depending on how the dealings develop, this could indicate a few interesting signs:
1) China, in looking for energy development opportunities, feels comfortable working with the Iraqis again, and parallel its interests in Iran. Potential Impact: Economic ties to both Iraq and Iran could provide China more leverage in diffusing any future conflict between the two countries.
2) China is more optimistic than pessimistic on Iraq's ability to stabilize into the future, perhaps because of US involvement. Potential Impact: Recently President Bush mentioned how President Hu stated his #1 concern was creating 25 million new jobs per year. With the US in Iraq and Iran having relatively friendly business relations with China, it seems worth investigating the restarting of the old Iraqi dealings. China economic involvement itself could act as another stabilizing force in Iraq in the long-term.
3) China is aware of Japanese investment in Iraq and seeks to ensure that it also is able to capture part of the energy pie in the country. Potential Impact: Look for more potential opportunities for joint Japan-China investment and energy development--as they could eventually do in the seas between the two countries. Relative to its energy demand, Japan is one of the most efficient energy users in the world and its energy-saving technologies will be in high demand across China into the future.
As can be seen in the picture to the left, China's Ahdab interest is in the Southern part of Iraq, as are all of the other interests targeted in the past or still targeted by Japan and South Korea. For the PowerPoint document with this map, please download the following file:
In terms of intelligence--economic, political and security intelligence, it makes sense for China to be on the ground in Iraq and since it is willing to extend its hand economically in other troubled regions, that is logically the first hand it will extend in Iraq--especially with economic interests across the way in Iran. However, with just discussions occurring at this point, China doesn't yet have to risk assets on the ground but has a seat at the table to more closely observe developments in Iraq's oil industry. Of course, with many Western companies refraining from investment, Iraq will have no problems with talking to the Chinese.
Yet, it will be interesting how China addresses potential threats to its security in "the Gap", as Tom touches on in his post:
"Last week I told the Chinese in Beijing: soon they will come looking to kill and torture and drive off the Chinese in order to drive off globalization. The backlash is just beginning. There ain't no such thing as a free lunch."
I look forward to reading Tom's following of events into the future and I will be sure to comment where I feel some value can be added.