Study the roots of 20th Century conflicts and a common theme will emerge: the quest for secure energy. With the conversion of the Royal Navy from coal to oil just before the First World War, and Great Britain’s Anglo-Persian supply chain, oil had for the first time become a strategic commodity. The drive for secure energy has been the motivation for offensive operations ever since, from Hitler’s move into the Caucasus in 1942-43 (which ended in the Stalingrad disaster) to our own rescue of Kuwait from Saddam Hussein in 1991. The Chinese politburo understands this nexus between energy and security/power better than most. As their economy expands, the need for secure energy is paramount to their quest to be the predominant world power.
It is also their Achilles heel at the moment.
According to the International Energy Agency (IEA) China is slated to be the world’s number one importer of natural gas, with its insatiable demand rising 60 percent to 376 billion cubic meters from 2017 to 2023. This presents them with a vulnerability … the likes of which so concerned Imperial Japan in the 1930s and which was the catalyst for their ruthless aggression into the oil fields of Indochina. China will soon surpass Japan as the leading importer of both piped and liquefied natural gas. Their LNG imports could more than double to 111 million tonnes by 2025 from last year, at an average annual growth of 10.9 per cent, according to a Morgan Stanley forecast. Reuters reported that China, Japan and South Korea will buy 48 per cent of the 505 bcm of LNG sold in 2023. “When all of Asia is taken into account, LNG sales there will rise to 75 per cent of all LNG sold globally from 72 per cent [in 2017].”
Conversely the United States is both energy independent due to the shale revolution over the past decade, and now the third largest exporter of LNG, soon to be the largest if trends continue. This has presented a strategic conundrum to the Chinese, who view the U.S. through an adversarial lens. It is not happenstance that among their retaliatory tariffs was a 25% punitive duty on LNG from the U.S. The impact has been biting. Prior to the slowdown, China was on track to import 141.6 billion cubic feet (bcf) of U.S. LNG in 2018, up from 103.4 bcf in 2017 and 17.2 bcf in 2016. (It imported no U.S. LNG in 2015.) In total, however, China bought just 93.9 bcf of U.S. LNG in 2018. The U.S. last year accounted for just 4 per cent of China’s LNG imports, compared to Australia’s 43.7 per cent and Qatar’s 17 per cent.
But the tariff war will end at some point and the Chinese will still find themselves in the unenviable strategic position of foreign dependency for their energy needs. Enter the continent of Africa.
It is no leap of logic to see why the Chinese have been so active in sub-Saharan Africa. According to the IEA’s Africa Energy Outlook 2019, Africa’s share in the global energy mix is set to soar from 5 per cent today to 25 percent by 2040. Over 40 per cent of global gas discoveries from 2011 to 2018 have been in Africa: Mozambique, Tanzania, Senegal, Mauritania, Egypt, and South Africa. As such China has been pouring in investment capital into Africa’s energy sector. South African Renergen has granted the contract for the production of their newest small-scale LNG plant to the Chinese Western Shell Cryogenic Equipment. The African Energy Chamber recently secured $1.4 billion investment in “bankable projects in mining, oil & gas, power and renewables” and plans to hold the first China-Africa Energy Investment Forum in 2020 in Beijing. Chinese investments and contracts in sub-Saharan Africa total $299 billion from 2005 to 2018, according to the China Investment Global Tracker, and in 2018, Chinese president Xi Jinping vowed to invest a further $60 billion into African nations.
So aggressive has been China’s move into Africa that fears of a neo-colonialism through “debt-trap diplomacy” have emerged. It would not be a stretch to see the Chinese not as business partners in Africa so much as modeling their expansion into the energy and minerals rich lands after the Western colonization of the continent—and Asia—to exploit its resources and provide itself a more reliable, and friendly source of vital materials as was seen in previous centuries.
Sri Lanka has already seen what “debt-trap diplomacy” looks like. This year, the country owes nearly $13 billion, much to China, out of a forecast annual revenue of less than $12 billion. In a complex arrangement the inability to service Chinese debt led to a handover in 2018 of the port of Hambantota, which China sees as a linchpin in its national security sphere given its proximity to rival India (much as Cuba was for the USSR vis-à-vis the U.S). In 2017, the island nation borrowed $1.5 billion from the IMF, but this wasn’t enough—in May 2018, Sri Lanka took a new loan worth $1 billion from the China Development Bank.
This model may be tacitly at work in Africa. Already Djibouti on Africa’s east coast has committed 81% of its GDP to servicing Chinese debt. Tomorrow it may not be a Sri Lankan port but an African natural gas deposit, oil field, or LNG export station.
The Chinese have not been reticent in their quest to make the 21st Century the Chinese Century. A major hurdle towards this end is achieving true energy independence. In lieu of a shale revolution as was seen in their arch-rival the U.S., they must outsource their energy production to nations open to their investment dollars and willing to look the other way should they become less of a partner than an overlord.
While U.S. energy firms fret over the short-term low energy prices eating into share-holder value, China, once again, plays long ball in Africa. If we are not mindful, a good portion of global LNG production could go the way of rare earth metals and fall into Chinese hands courtesy of a continent long under-served and/or exploited by Western interests. Perhaps Beijing is not so averse to colonialism after all.
Brad Schaeffer is the author of the WW2 Novel Of Another Time And Place [Post Hill/Simon & Schuster, 2018]