The Kingdom of heaven may run on peace and goodwill. But the Kingdom of earth runs on oil." So said British Foreign Secretary Ernest Bevin in 1948, and he had the 20th century’s two darkest periods as evidence.
The First World War was partially set off by German concerns that other colonial powers, notably the British, had put their foot on too large a share of global oil fields. Japan’s fears over access to supplies of oil and other resources brought that country into World War Two.
Now, many on the Arab Street believe that the invasion of Iraq had nothing to do with weapons of mass destruction and everything to do with US oil strategy.
Take your pick of consequent potential flash points in the Persian Gulf, the Caspian Sea, Latin America and the Caribbean. A number of what political scientists call "actors" have climbed up from the stalls recently to claim center stage.
One of them is former paratrooper Hugo Chavez, President of Venezuela.
He parachuted into Beijing last month with a pledge to sell China vast quantities of oil, and an invitation to join his grand alliance for a "multipolar world to challenge the hegemony of the United States".
Chavez, who was on his fourth trip to the Chinese capital, got the treatment that befits the head of the world’s fifth-largest oil exporter, a country that earns US$30 billion a year in revenue from the black stuff. He was received by President Hu Jintao in the Great Hall of the People and also hosted by Premier Wen Jiabao.
The amount of oil the Venezuelan leader is eager to supply to the energy thirsty economy seemed to be ratcheted upwards almost hourly on his six-day visit.
He began by announcing that shipments would be increased one third to 200,000 barrels a day by the end of the year. That became 300,000 barrels and then 500,000 by 2009 and perhaps a million barrels a day thereafter.
As recently as 1993, China was a net exporter of oil. Today the fourth-biggest global economy imports almost 40% of its needs. With the country’s own reserves beginning to run dry, that dependence is set to rise to 70% within two decades. Analysts expect the 3.4 million barrels China buys each day – mainly from Angola, Saudi Arabia, Iran and Russia – to double inside a decade.
Through skillful diplomacy China has built up substantial energy investments in Africa, clinching production and exploration deals in Sudan, Angola and Nigeria. And last year PetroChina bought PetroKazakhstan in a groundbreaking US$4.2 billion deal.
The strategy in lesser-developed countries well endowed with minerals is to offer aid and infrastructure projects in return for oil and other raw materials. China has made substantial investments in Latin America including an US$8 billion railway for Argentina, while acquiring a stake in that country’s Pluspetrol oil and gas group, and US$10 billion in energy and transportation deals in Brazil.
Two-way trade with the region is worth more than US$400 billion.
Venezuela, on the face of it, is the Big Enchilada. Chavez claims that his country’s oil fields will double their current production to 5.8 million barrels a day by 2012, in support of what sounded like overly ambitious promises made in Beijing.
Caracas also says China has agreed to invest US$5 billion in energy projects in the country with the money going into both new and mature oil fields.
There are some formidable difficulties, though. Venezuela is presently unable to meet its full OPEC quota of 3 million barrels a day. To sell China a lot more oil any time soon, Chavez would have to slash sales to his best customer, the US. America buys over half the country’s oil output and largely underwrites the livelihoods of 27 million Venezuelans.
Chavez blusters that this would suit him fine. He has been travelling the world as the self-elected chairman of an alliance to curb the power of the US. It is not hard to sign up members of an anti-American club these days if you go to the right addresses.
He has been warmly applauded in the corridors of Havana, Kuala Lumpur, Damascus and Tehran. The trip was part of a campaign to win a rotating seat on the 15-member UN Security Council. China is backing Venezuela’s bid but has declined to be associated with the strident anti-imperialist rhetoric.
Time is money
Chavez has another problem. Venezuela can send oil to the US gulf coast in four to five days while shipments to China take as long as 45 days to cross the Atlantic and Indian Oceans, pushing up transportation costs by as much as US$3 a barrel.
In addition, most of China’s refineries are designed to process light sweet crude. Venezuelan oil is mainly heavy and sulphurous and it would require substantial investment in new or modified refineries to handle it.
China continues to be astute in diversifying its energy suppliers and picking up diplomatic points along the way. Venezuela will bring another swing factor in the years to come. Conflicts over resources can only be avoided if every player feels it will get a fair share of the world’s dwindling energy resources.
The portents are not too cheerful.