30 September 2020, NIICE Commentary 6067
Sidra Altaf
The ever-growing energy demand, due to its high consumption is an area of grave concern for China. With the domestic sources, almost stripped, China had to start importing oil to meet its energy requirements since 1993, which will continue to grow in the coming years. In such a scenario, China depends extensively on oil imports from countries via the Malacca Strait, one of the major and the busiest waterways in the world today with about one-third of global trade and thirty-five percent of oil from the Middle East toward China, Japan, South Korea and the Pacific Rim being carried through this strait alone.
According to CSIS China Power, an estimated USD 3.4 trillion in trade passed through the South China Sea in 2016. As far as China is concerned, an estimated 70-80 percent of China’s energy imports are conveyed through this route. China imports about 47 percent of its oil from the Middle East. Over 64 percent of China’s maritime trade transited the waterway in 2016. The China Youth Daily on 15 June 2004, summarised the importance of Strait of Malacca as, “It is no exaggeration to say that whoever controls the Strait of Malacca will also have a stranglehold on the energy route of China” which remains relevant today.
For China, however, the dilemma stems from the fact that it has no jurisdiction over the region. The region is a hotspot for piracy as well as of great interest to major economies and naval powers like the US. The US has the potential to cause interference in the area resulting in “energy encirclement”. In 2003, China’s former president Hu Jintao coined the term ‘Malacca Dilemma’ to refer to this area of concern for China. China has two possible options to solve its dilemma that is through either finding new trading partners to meet its ever-growing energy needs or finding entirely new routes for trading, thereby completely bypassing the Straits.
Two Ways to Go
Of the two viable options in front of China, in order to decrease its dependence on Malacca Straits – diversifying its trading partners, to include Russia and Kazakhstan has already been set in motion as both are able to trade with China via land routes. With the development of Russia’s East Siberian field and the accompanying East Siberian-Pacific Ocean (ESPO) pipeline, the prospects of import have improved for China.
Similarly, in terms of finding new routes, China’s BRI initiative with its components like the Trans-Myanmar oil pipeline, coupled with a natural gas line enables it to import oil from the Middle East through Myanmar. The Myanmar-Yunnan pipeline is significant in this regard. Subsequently, in Pakistan, as well, China is working to connect Pakistani coast to Xinjiang. In addition to this, the proposed Kra Canal, in Thailand would allow China a passage north of the Straits of Malacca.
However, cooperation with Malaysia and Indonesia would be far more helpful to China as by bringing the two states into its fold of allies, China would be able to conduct trade with lesser risk. With respect to the two states, both have received significant funding from China which could result in potential cooperation among the states which would be beneficial to China in order to advance its motives in the long run. Where Indonesia has been a willing partner to China; Malaysia fears that it will be indebted to China and this could prove to be detrimental to its sovereignty.
At home, China has the capacity to hold about 160 million barrels which was proposed to be raised to 500 million barrels by 2020. Consecutively, according to the Economic Times dated, 20 April 2020, “China almost doubled the rate at which it put oil into storage in the first quarter of 2020, in order to deal with the loss of consumption as the Coronavirus caused much of the country to be placed in some form of lockdown.”
In terms of security, China launched the “Blue Water Navy” strategy in 1987 which was a measure to counter the US naval presence and to mitigate any security concerns arising in the area and to safeguard its SLOC.
The Quad Quandary
In realist terms, the QUAD is seen as an alliance aimed at forming an “Asian Arc of Democracy” to contain China. The Chinese vice Foreign Minister, Le Yucheng expressed this sentiment in September 2019 as, “We are firmly against attempts to use the Indo-Pacific strategy as a tool to counter the BRI or even contain China”.
With the rise of more conservative leaders in the US, India and Australia; the QUAD seems to be gaining momentum. Even though the PM of India in 2018 said, “India does not see the Indo-Pacific Region as a strategy or as a club of limited members. Nor as a grouping that seeks to dominate. And by no means do we consider it as directed against any country”. Yet, the recent developments seem to undermine these claims. The growing Indo-US proximity poses a threat to China’s future. Quite recently, United States Secretary of State, Mike Pompeo called for deepening the bonds between democracies in a bid to what he called ‘an alliance against economic decoupling from Beijing’. Subsequently, the USS Nimitz Aircraft Carrier was joined by the USS Ronald Reagan in conducting drills with the Indian Navy in the Indian Ocean. India has also invited Australia, which recently declared China’s claims to the South China Sea as illegal, to the annual Malabar exercises.
Conclusion
With the ever-growing tensions regarding China’s Malacca Dilemma, things could go either way. Recently, China fired two missiles as a warning to the US. Even a global pandemic hasn’t deterred the states to assert their presence and influence in the ocean which goes to show how pivotal the region is to China due to its energy security concerns and for other states that apprehend the threat that arises out of China becoming too predominant in the region.
