Shifting energy import patterns enhance China’s clout in the Middle East
Subtle shifts in Chinese energy imports suggest that China may be able to exert influence in the Middle East in alternative and subtle ways that do not involve military or overt economic pressure.
The shifts involve greater dependency of the Gulf states on oil and gas exports to China, the world’s largest importer, at a time that the People’s Republic has been diversifying imports at the expense of Gulf producers.
The shifts first emerged in 2015 when Chinese oil imports from Saudi Arabia rose a mere two percent while purchase of Russian oil jumped almost 30 percent. Russia rather than Saudi Arabia has been for much of the period since China’s biggest crude oil supplier.
The shifts were reinforced by the US shale boom, a resulting drop in US imports from the Gulf, and President Donald J. Trump’s tougher trade policies.
“With the Trump administration, the pressure on China to balance accounts with the U.S. is huge… Buying U.S. oil clearly helps toward that goal to reduce the disbalance,” said Marco Dunand, chief executive and co-founder of commodity trading house Mercuria.
At the same time, China became in 2016 the largest investor in the Arab world with investments worth $29.5 billion, much of which targeted infrastructure, including the construction of industrial parks, pipelines, ports, and roads.
Compounding the impact of shifts in Chinese energy imports is the fact that despite support for Russian policy in the Middle East, Beijing increasingly fears that Moscow’s approach risks escalating conflicts and has complicated China’s ability to safeguard its mushrooming interests in the region.
Viewed from Beijing, the Middle East has deteriorated into a part of the world in which regional cohesion has been shattered, countries are fragmenting, domestic institutions are losing their grip, and political violence threatens to effect security and stability in northwest China.
China’s concern is likely to increase if and when the guns fall silent in Syria and the country begins to focus on reconstruction. Already China worries that Uyghur foreign fighters in Syria and Iraq are heading to areas closer to Xinjiang in Pakistan and Afghanistan.
An end to the war in Syria, moreover, opens up economic opportunity but is also likely to sharpen rivalry between Russia and China as that will play to China’s strength and highlight Russian weaknesses.
China’s interest in Syrian reconstruction goes beyond dollars and cents. “Syria can be a key logistics hub for China. Its history is the key to bringing stability in the Levant, meaning it has to be incorporated into China’s plan in the region. From a security perspective, if Syria is not secure, neither will (be) China’s investment in neighbouring countries,” said Kamal Alam, a Syrian military analyst.
All of this raises the question of how China can best stand up for its interests against the backdrop of a perception among Chinese scholars that China’s unsuccessful efforts to mediate in multiple conflicts in the Middle East, including Israel-Palestine, Syria and the Gulf crisis that pits a United Arab Emirates-Saudi-led alliance against Qatar, have failed to position the People’s Republic as a credible alternative to the United States and Russia.
Pouring fuel on the fire, is the fact that Chinese support for Russian policies in the United Nations Security Council and elsewhere has effectively identified Beijing with Moscow rather than allowed it to differentiate itself.
The Middle East has already forced China to move away from long-standing principles that underwrote its foreign and defense policies for decades like non-interference in the domestic affairs of others and a refusal to establish foreign military bases even if officially they remain valid.
China has in part been able to maintain the dichotomy between theory and practice by evading public discussion on issues such as whether and under what circumstances China should use military force or apply economic pressure as it did for example when it expressed in 2016 discontent with a South Korean decision to deploy a US THAAD (Terminal High Altitude Area Defence) anti-missile system.
Beyond the establishment of China’s first foreign military base in Djibouti, Chinese special forces have been advising Syrian president Bashar al-Assad’s regime in its operations against jihadists that include Uyghurs in their ranks and have operated on the Afghan side of the Central Asian nation’s border with the People’s Republic.
China scholar Andrea Ghiselli noted that Chinese diplomats, scholars and journalists seldom focus on security in public, pointing instead to “the positive elements” of China’s relationships in the Middle East.
Nevertheless, Mr. Ghiselli observed that few Middle Eastern leaders attended last year’s Belt and Road Forum in Beijing that was intended to showcase China’s Eurasian-focused infrastructure investment initiative as “a more open and efficient international cooperation platform; a closer, stronger partnership network; and to push for a more just, reasonable and balanced international governance system.”
The Gulf crisis has rendered the six-nation Gulf Cooperation Council that groups Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman and Bahrain impotent and complicated negotiations for a free trade agreement with China.
Similarly, a potential withdrawal this month of the United States from the 2015 international agreement that curbed Iran’s nuclear program would likely put China at odds with Middle Eastern proponents of a tougher attitude towards the Islamic republic like Saudi Arabia, the UAE and Israel.
The hardening of Middle Eastern fault lines is likely to make it increasingly difficult for China to remain aloof and emphasize economic and trade relationships without getting sucked into the region’s multiple conflicts.
Saudi Arabia has so far refrained from making economics a fixture of its relationships in its effort to counter rising Iranian influence in the Middle East, and together with the UAE, has not attempted to force third countries to abide by its boycott of Qatar.
The question is whether the Gulf states will maintain their caution. Omar Ghobash, the UAE’s ambassador to Russia, suggested last summer that the anti-Qatar alliance could “impose conditions on our own trading partners and say you want to work with us then you have got to make a commercial choice.”
The alliance has so far not acted on Mr. Ghobash’ suggestion, in part because the international community, including China, have called for a negotiated end to the crisis and refused to back the Saudi-UAE position.
The shifts in China’s energy imports coupled with China’s need to protect its interests means that the People’s Republic may be in a position to leverage its power in alternative ways.
“This…gives China significant leverage to impose its preference in oil contracts and improve its own energy security. It also means that China has the capability to greatly determine the economic future of countries currently engaged in all the regional hotspots, a costly endeavour that cannot be sustained without matching capital inflows,” Mr. Ghiselli said.
“Thus far,” he added, “China has bought oil and gas from both Sunni and Shia countries without showing evident preferences. However, were China to do otherwise, its actions might produce deep changes in the region in ways not different from those of a military intervention in favour of one of competing parties.”
Strategic Partnership Opportunities among ASEAN countries towards Renewable Energy
Quoting from Singapore’s Prime Minister, Lee Hsien Loong, during his plenary speech at the 42nd ASEAN Summit in Labuan Bajo (Wednesday, May 10, 2023), which promotes other ASEAN countries to have a joint power grid (based on an article published by Channel News Asia). This statement is highlighted after the success made by the Lao PDR-Thailand-Malaysia-Singapore project in supplying renewable energy. In recent years, the importance of renewable energy has become increasingly apparent as countries worldwide seek to reduce their carbon footprint and address the impacts of climate change. The ASEAN region, comprising ten Southeast Asian countries, is no exception towards the movement. As a region with a rapidly growing energy demand, ASEAN countries are looking to renewable energy as a critical solution to address their energy needs while mitigating climate change by shifting towards renewable energy. In this context, strategic partnership opportunities among ASEAN countries can be crucial in accelerating the Sustainable Energy Transitions Initiative.
Renewable Energy Opportunities in the ASEAN Region
The ASEAN region has diverse renewable energy resources, including solar, wind, hydro, geothermal, and biomass. According to the International Renewable Energy Agency (IRENA) in 2018, wind energy is potentially growing in the Philippines, Indonesia and Vietnam because the wind speeds are between six to seven metres per second. On the other hand, IRENA and ACE (2016) highlighted geothermal potential in Indonesia and the Philippines. Besides, Indonesia, the Philippines and Singapore also have opportunities to explore ocean energy since the geography position is an archipelago (ASEAN RESP, 2016).
However, despite the potential of these resources, the region still relies heavily on fossil fuels, particularly coal, to meet its energy needs. According to the study “The ASEAN Climate and Energy Paradox” by I.Overland, H. F. Sagbakken, H. Chan, M. Merdekawati, B.Suryadi, N. A. Utama & R. Vakulchuk, the energy demand from fossil fuels between 2000 to 2018 resulted to 85% while the share of renewable energy in the energy mix remained. This reliance on fossil fuels contributes to climate change and exposes the region to energy security risks and price volatility. As a result, there is a growing recognition among ASEAN countries that renewable energy can play a critical role in reducing dependence on fossil fuels and achieving sustainable energy systems.
Countries Strategic Partnership
ASEAN countries can accelerate the deployment of renewable energy technologies and overcome common challenges. Some countries have already made significant progress in developing their renewable energy sectors, while others are still in the early stages of deployment. By working together, countries can learn from each other’s experiences and leverage their strengths to achieve renewable energy goals.
The unprecedented COVID-19 pandemic has highlighted the importance of resilience and sustainability in the energy sector. The pandemic has disrupted energy supply chains, and more demand for renewable energy will rise in 2020. The key players in the energy sector should form more strategic partnerships to encourage energy trading in response to the high demand for electricity across the region in the future.
As a result, strategic partnerships among ASEAN countries can help accelerate the transition to renewable energy and create a more resilient energy system that can withstand future shocks. In February 2023, the Electricity Generating Authority of Thailand (EGAT) and Tenaga Nasional Berhad (TNB) entered into a Memorandum of Understanding (MoU) to conduct a feasibility study to enhance the interconnection of the power grid between Peninsular Malaysia and Thailand.
Benefits of Building Strategic Alliance
The development of regional energy infrastructure can significantly impact regional energy infrastructure development. Establishing interconnectors and cross-border electricity trading can enable ASEAN countries to share renewable energy resources and optimise their use. This can address the issue of intermittency, which is a common challenge for renewable energy sources. Through diversification of renewable energy sources and sharing resources, ASEAN countries can create a more stable and resilient energy system by diversifying renewable energy sources and sharing resources.
In addition to sharing knowledge and infrastructure, strategic partnerships create opportunities for joint investments in renewable energy projects. By pooling their resources and expertise, ASEAN countries can undertake more significant and complex projects which require more work executions and upskill their employees through tacit knowledge. Most of the electricity firms in the ASEAN region are state-owned companies and require endless government support. For instance, governments can collaborate to develop large-scale renewable energy projects, requiring substantial capital investment and technical expertise. Joint assets can attract private sector investment and reduce the financial risks associated with renewable energy projects.
A strategic partnership can promote the adoption of policies and regulations that support the growth of renewable energy. ASEAN countries can develop common standards and rules for deploying renewable energy technologies, such as feed-in tariffs and tax credits. ASEAN countries can create a more predictable and stable policy environment for renewable energy investment.
Future of Renewable Energy
Other than the potential benefits of strategic partnerships, ASEAN countries may need to construct more institutional mechanisms to facilitate regional cooperation on renewable energy. There are existing platforms for cooperation among ASEAN countries, such as the ASEAN Centre for Energy and the ASEAN Power Grid. These platforms are more targeted initiatives. ASEAN countries shall also focus on renewable energy and facilitate collaboration among relevant stakeholders, including government agencies, industry players, and civil society organisations.
One notable initiative is the recent launch of the ASEAN Catalytic Green Finance Facility (ACGF), which aims to mobilise private sector investment for green infrastructure projects in the ASEAN region. The ACGF, which the Asian Development Bank (ADB) supports, will provide loans and technical assistance to project developers and financial institutions to support the development of renewable energy and energy efficiency projects. This initiative is an example of how strategic partnerships between governments and international organisations can help to catalyse private sector investment in renewable energy. According to ADB’s website, realising the shortfall of green infrastructure at $100 billion per year, private capital should consider grasping the opportunities to fill the gap to accelerate renewable energy growth.
The development of offshore wind projects requires significant technical and financial resources. Countries can address these challenges through strategic partnerships by pooling resources and expertise to develop large-scale offshore wind projects. For instance, several countries, such as Vietnam, Thailand, and the Philippines, are exploring offshore wind’s potential as a key renewable energy source. Based on the article published by Nikkei Asia entitled “Vietnam Offshore Wind Power Sparks Influx of Foreign Investment”, during the COP26 United Nations Climate Summit 2021 in Glasgow, the Vietnamese Prime Minister, Pham Minh Chinh mentioned the government’s commitment to shifting to renewable energy through the wind power in which accounts for about 5% of energy on a power generation capacity at the moment and the government plan to raise till 30% by 2025 despite the challenges faced.
In conclusion, strategic partnerships among ASEAN countries towards renewable energy have the potential to accelerate the transition to a low-carbon energy future, promote regional energy security, and support sustainable economic development. However, realising this potential requires more institutional coordination, financial resources and inclusive stakeholders’ involvement to address the future landscape of renewable energy. By working together and leveraging their strengths, ASEAN countries can create a more sustainable energy future that benefits people and the planet.
Role of Renewable Energy in Mitigating Climate Change as part of Saudi Vision 2030
Growing up in Saudi Arabia between the first and third decade of the 21st century, I, like most others, was aware of the slow yet noticeable changes in the Saudi climate over the years. The curse of climate change became apparent, with rain getting intense and flash floods ravaging coastal cities frequently. I was in Jeddah during the 2009 flash floods and witnessed firsthand the horrors the locals went through, with 122 dead and more than 350 never to be found again. Such a harrowing change in climate in a short span is concerning for the public as well as the policymakers who have begun to look for solutions, particularly in renewable energy.
The kingdom is part of some of the countries that are most vulnerable to climate change. Saudi Arabia has an acute water shortage issue that poses a threat to its people and the environment. Besides water scarcity, the kingdom is also a potential victim of rising sea levels (a 3mm increase per year), with about 210,000 people at risk of flooding by 2050. Temperature rises are also a concern for the Saudis, studies predict an increase between 3 to 4.2 degrees Celsius of daily surface mean temperature in the long run. According to The Climate and Atmosphere Research Center, about 600 million people in the Middle East and North Africa are at risk of heat exhaustion and heart attacks due to heat waves by the start of the next century. Extreme rainfall is also a potentially lethal impact of climate change on Saudi Arabia, as evident by the 2009 and 2018 flash floods. Precipitation in the kingdom is anticipated to increase by around 23%-41% in the long run due to climate change, which only aggravates existing issues.
Since Saudi Arabia depends on oil for its income, any factors affecting it will affect the economy and the people. Due to changes in trends, oil demand is constantly decreasing due to the increased popularity of green energy, causing oil prices to fluctuate since 2014. Studies show that the kingdom must keep about 68% of its oil reserves and 85% of its fossil fuels untouched to keep warming below 1.5 – 2 degrees Celsius. Moreover, the Middle East must abandon 40% of its oil and 60% of its natural gas reserves. Since the kingdom relies on oil for most of its income, such measures will prove detrimental to its economy and ultimately its people.
Therefore, in 2016, the kingdom announced plans for Vision 2030, which aimed to curtail many of the issues surrounding climate change using renewable energies. For this purpose, the Saudi Green Initiative was launched in 2016 and aimed to eliminate emissions by 2060. The kingdom plans to invest more than $100 billion into the project to achieve its objectives. However, there is reasonable doubt about these goals, which may sound overly ambitious. As the country continues to receive criticism from the Climate Change Performance Index which gives it an average ranking of 62nd. Therefore, there is considerable risk involved as the country is currently not on track with the Paris Agreement’s 1.5-degree Celsius limit.
During the past seven years, Saudi Arabia has invested approximately $400 billion into renewable energy, with plans to invest an additional $30 billion in the next two years. As part of Vision 2030, the government plans to achieve renewable and sustainable energy projects for 9.5 GW of RnSE (Renewable and Sustainable Energy). However, energy demand is projected to rise to 120 GW by 2032, which is much more than what is currently being worked on. The government plans to invest in solar, wind, and hydropower energy to achieve its energy demands and mitigate climate change.
Saudi Arabia has immense potential for solar power, after the government’s testing through 46 weather stations across the country. It has a large surface area and lies in the Global Sunbelt. Through solar power, the kingdom plans to generate 42.7 GW of energy. In 2019, the kingdom connected the 300 MW Sakaka power plant, 10 MW Layla al-Aflaj power plant, and 50 MW Waad al-Shamal power plant to the rest of the country. Furthermore, the Saudis have shown interest in seven additional plants in Madinah, Rafha, al-Qurayyat, al-Faisaliah, Rabigh, Jeddah, and Mahd al-Dahab with a combined capacity of 1.52 GW. In 2020, further progress was made by embarking on four more plants with a total capacity of 1,200 MW. The Saudis have made promising progress in solar energy, as evidenced by the kingdom becoming the 6th largest in solar energy generation, with plans to generate a third of their energy from solar power. However, there are large sums of costs associated with solar panels, along with dealing with external factors such as high temperatures, dust, and humidity that reduce efficiency. It can also backfire and damage the environment by causing soil erosion. On the other hand, it has been argued that the benefits outweigh the drawbacks as it is renewable and produces zero air and water pollution, which is why the Saudi government should continue to explore this option with the same momentum they currently maintain as it provides the opportunity to explore other economic policies such as carbon taxes.
The kingdom has also invested in wind energy to generate 16 GW of energy. A $500 million wind project in Daumat al-Jandal was funded by the government in 2017. ARAMCO also installed two 2.75 MW plants in Turaif and Huraymila in 2017 and 2019. Aiming to exploit its wind potential, the kingdom intends to become one the largest wind energy markets in the next half of the century. However, it requires a constant volume of wind, which is projected to decrease in the kingdom. It can damage the environment by harming the land and killing birds. However, this drawback has been explored by researchers and newer models of wind turbines are more efficient at maximizing productivity and minimizing drawbacks. Moreover, the wind farms often add to the scenic beauty which can come in handy for the kingdom that is seeking to make tourism 65% of its GDP by 2030.
The kingdom currently relies on desalination plants to curb its water shortage, producing around 4 MCM per day. It seeks to increase the number to 8.5 MCM per day by 2025 with its 28 distillation plants to achieve climate objectives. The desalination plants can also be used to produce hydropower, particularly the Ras al Khair plant, as well as others such as the ones in Jubail, Khobar, al-Khafji, Jeddah, al-Shuaibah, Yanbu, and al-Shuqaiq. However, the kingdom faces drawbacks in maximizing hydropower production due to its unfriendly landscape for dams and the lack of water bodies. Moreover, the kingdom is a tribal society at heart in its vast deserts which retains the propensity of social conflicts between the government and the locals, as had happened in the Tabuk region between the state and Huwait tribe due to the construction of NEOM and The Line. Therefore, hydropower may not be a viable option for Saudi Arabia, but it is still a viable substitute.
Renewable energy will provide unsurmountable benefits to Saudi Arabia. Studies show that the GCC region can rid itself of almost one gigaton of carbon emissions and save around $87 billion in reserves. Renewable and sustainable energy will also create many jobs for Saudis, estimated to be 80,000 by 2030. It will also preserve the rapidly depleting oil reserves of the country and reduce carbon emissions by almost 3kgs for every m3 of produced water.
There are certain challenges and risks that the Saudis currently face. There is a lack of coordination between different institutions of the state to execute policies and collect data. This causes a gap in accessible knowledge and data, clouding analysis and making it difficult to measure progress. Professionals and academics must be aware of the intensity of climate change and that is not possible without concrete data produced by trustworthy sources such as government institutions. This could also result in the misallocation of funds and resources which hinder further progress as policymakers would have a low-resolution picture of the cost of operations. Therefore, organizations like King Abdulaziz City for Science and Technology (KACST), King Abdullah University of Science and Technology (KAUST), King Abdullah Petroleum Studies and Research Center (KAPSARC), King Abdullah City for Atomic and Renewable Energy (KACARE), and others, must increase collaboration, coordination, and integration to make data more readily available both to the government and the public. Moreover, it is not possible to counter climate change solely through national programs, neighboring countries in the Middle East also need to cooperate with the Saudis to collectively deal with the issue, however, that is not always possible due to domestic issues such as civil wars, terrorism, natural disasters, and so on. These issues will jeopardize any efforts toward a sustainable future and further worsen the impact of climate change in the Middle East.
Italian Eni: Energy Transition and Economic Development as Fundamental Pillars of Approach in Africa
Eni, an Italian multinational energy giant headquartered in Rome, in its latest 2022 report has outlined the main outcomes and objectives in the energy transition pathways for a number of African countries. It described Eni’s contribution to a just transition that ensures access to efficient and sustainable energy, sharing the social and economic benefits of the path towards net zero emissions by 2050 with employees, suppliers, communities, and customers with an inclusive and transparent approach.
“In addressing the challenges in the energy sector that Eni faces, we keep our priorities firmly on track with an ongoing commitment to promote energy access, local development, and environmental protection,” said Claudio Descalzi, Eni’s Chief Executive Officer.
She explained that the success of Eni’s strategy could not be achieved without collaboration with key stakeholders, from private individuals to the public sector, international organizations, civil society associations, and research institutes. “Today, more than ever, it is necessary to pool resources and human capital, through a broad vision that allows us to align our common goals, to reduce geographical gaps and promote global human progress,” said Claudio Descalzi.
With regards to the carbon neutrality strategy, Eni remained firm in its commitments towards net zero emissions by 2050 and confirmed all its decarbonization targets, which are anchored on sound investments.
The company achieved a 17% reduction in Scope 1, 2 and 3 emissions, compared to 2018 levels, and continued implementing the necessary measures to achieve Scope 1 and 2 net zero emissions in the Upstream by 2030, by investing in emission-reduction technologies and developing low-carbon projects. In this context, in 2023, Eni launched the FPSO that will be used for production from the Baleine field in Côte d’Ivoire, the most important discovery ever made in the country and the first net zero development for Scope 1 and 2 emissions in Africa.
In Eni’s strategy, the United Nations Sustainable Development Goals are a fundamental reference for conducting activities in the countries of operations. Agri-business projects, for example, embodies the fundamental pillars of Eni approach for the just transition, an energy transition with a strong innovative component combined with a concrete focus on the social dimension.
In this context, Eni is committed to ensure that the decarbonization process offers opportunities to convert existing activities and develop new production chains with significant perspectives in the countries where it operates.
In 2022, the first cargo of vegetable oil produced in Kenya not competing with the food production chain, from waste and raw materials produced on degraded land, was delivered to Eni’s biorefining plant in Gela, with substantial positive impacts on employment and local development. The model will be replicated in other countries.
To achieve a just transition, particular attention was paid to initiatives to promote access to energy and education in the countries of operation. These include the projects in Côte d’Ivoire, Mozambique, and Ghana to facilitate access to clean cooking.
In Côte d’Ivoire, more than 20,000 cooking stoves were distributed in just six months, reaching more than 100,000 beneficiaries. Eni has promoted the right to education in Congo, Ghana, Iraq, Mexico, Mozambique, and Egypt, where it opened the Zohr Applied Technology School to significantly increase the number of youths with upgraded technical and professional skills in the energy and technology fields.
With revenues of around €92.2 billion, Eni ranked 111th on both the Fortune Global 500 and the Forbes Global 2000 in 2022, making it the third-largest Italian company on the Fortune list (after Assicurazioni Generali and Enel) and second largest on the Forbes list (after Enel). Per the Fortune Global 500, Eni is the largest petroleum company in Italy, the second largest based in the European Union (after TotalEnergies), and the 13th largest in the world.
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