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.”
Off-grid Renewables are Growing, Bringing Socio-economic Benefits to Millions
Off-grid renewable energy has witnessed spectacular growth over the last decade. Since 2008 capacity has trebled and the number of people in rural communities served by the technology has witnessed six-fold growth. Today, up to 133 million people are receiving life-changing access to low-cost, secure renewable energy and benefit from the socioeconomic impact access delivers. Global off-grid investments in 2017 reached USD 284 million.
These findings feature in a new IRENA brief launched during the UN High-Level Political Forum in New York. The paper, entitled: Off-grid Renewable Energy Solutions, Global and Regional Status and Trends, builds on IRENA’s statistical analysis to offer a global picture of the sector’s trajectory and impact. The data highlights the extent to which off-grid renewables are emerging as a mainstream solution to the expansion of electricity services all over the world, contributing to sustainable development goal 7 (SDG 7) by broadening the reach of electricity beyond existing grid infrastructure.
“Off-grid renewable energy is an important contributor to energy access across the developing world having witnessed widespread, rapid growth in deployment over the last few years,” said Dr. Rabia Ferroukhi, Deputy Director of the Knowledge, Policy and Finance at IRENA. “Our analysis captures this momentum whilst shedding light on the need to step-up efforts towards 2030 Sustainable Development Goals.”
Africa has emerged as a dynamic, fast-moving hub for off-grid renewables. The development of solar lighting solutions and innovations in deployment and financing models, such as pay as you go options and mobile payment platforms have contributed to Africa’s rapid advances. The continent’s off-grid industry now serves around 53 million people – the equivalent of the entire population of South Africa – up from just over two million in 2011.
The brief identifies Asia as a global leader in off-grid renewables capacity deployment. Today, up to 76 million people across the continent may now benefit from such power sources.
South America, home to some of the highest rates of electricity access in the developing world, has also witnessed off-grid renewable growth the brief suggests, where the technology is considered key to ‘last mile’ electricity access.
Off-grid renewable energy solutions are being deployed to provide electricity services for a wide range of end-uses, including for powering agriculture, telecommunication infrastructure, healthcare centres, schools, and rural enterprises. The paper emphasises that linking delivery of off-grid solutions to energy service delivery can unlock substantial socio-economic benefits, contributing to multiple SDGs.
While dramatic cost reductions have been the primary driver of this acceleration, it is the multifaceted socioeconomic benefits that provide the greatest incentives for its deployment. Renewable energy’s centrality to the SDG 7 goal on universal access to clean, reliable and affordable energy against a backdrop of a billion people who still live without it, is unquestionable. However, beyond energy itself renewables are a key contributor to sustainable development, generating jobs, stimulating growth, ensuring resource security and improving health.
The paper notes that in Bangladesh, around 133 000 jobs have been created through a Solar Home System programme and an off-grid renewables initiative in Rwanda aims to generate 7 000 jobs whilst delivering energy access to almost 80 000 people. Similarly, incomes in rural households benefit from lower cost solar lanterns, and remote health and educational facilities are enhanced through consistent availability of power.
“Renewables are a central pillar of SDG 7 and represent one of the most effective and economicmeans available in the pursuit of universal energy access,” said Rabia Ferroukhi, Deputy-Director of Knowledge Policy and Finance at IRENA. “Yet beyond this, we are now beginning to truly understand the way in which distributed renewable electricity is transforming the lives of those receiving from it, bringing stability and opportunity to millions of people around the world.”
CPEC and Pakistan-China Energy cooperation
The demands of global energy are substantially rising day by day in the 21st century, whereas the dependency on fossil fuels like coal, oil and natural gas have become a serious concern which is about 80% of the world’s primary source of energy. The concerns about fossil fuels are due to their ever rising prices and their negative impact on the environment due to the harmful emission of greenhouse gases. Therefore, in this context the reliance on nuclear power energy is considered by various countries, including Pakistan, as a good alternative option of energy supply, which is comparatively cheaper also.
Pakistan has great strategic importance in South Asia because of its location, its dynamic young population, its vibrant economic potential, being a nuclear power, and now being a strategic partner of China in the backdrop of the construction of the China-Pakistan Economic Corridor (CPEC).The CPEC is a flagship project of China’s Belt and Road (B&R) initiative and the completion of CPEC is likely to bring major economic advantages to China, Pakistan and South Asian region.
Like many other countries, for its economic development based on enhancing its industrial and agricultural production, energy is very important for Pakistan and it needs to address its current energy crises on an urgent basis. In this context signing of the CPEC agreement with China by Pakistan in 2015 is considered as a milestone achievement, as it includes many electricity generation projects, which will help address energy shortages of Pakistan.
Apart from developing other means of electricity generation in Pakistan, China is already helping Pakistan in nuclear energy production by supplying nuclear power reactors, under IAEA safeguards based on agreements signed in the field of nuclear cooperation. Apart from installing Chashma 1 and Chashma 2 power plants, which are already producing electricity in Pakistan, in 2017 China has signed another deal with Pakistan to also install Chashma 3 and Chashma 4 power plants. Out of these each power plant, after completion, will produce 1000 megawatts of electricity. As part of the CPEC project, China is also building two HUOLONG ONE nuclear reactors in Karachi that will become ready to use by 2021.
After signing the CPEC agreement China is very keen to help Pakistan in the energy production, as energy is required not only for the construction of CPEC projects but also for its subsequent operation. This is because China is also going to get huge trade benefits by trading with the outer world using the CPEC. In other words, apart from helping its friend Pakistan in energy production, this cooperation also serves China’s economic interests in a major way. In this context, the CPEC is a win-win project that serves Pakistan and China’s interest in a similar way.
As China is doing a lot to advance its interests by expanding its economic production by basing on its CPEC related exports, Pakistan should also take the CPEC as a big opportunity to develop its economy to become economically self reliant. In this context, it should focus on completing the construction of the CPEC and its related energy projects on time, so that it addresses its energy shortages and quickly moves on towards its economic development.
In fact, it is more important for Pakistan to work harder for completion of the CPEC related projects and make use of the CPEC to advance its industry and agriculture, increase trade, attract foreign direct investment and increase its revenues. This is important because Pakistan’s economy needs a major boost to recover from its ever increasing budget deficits, inflation, domestic and foreign debt situations,widening gap of balance of payments due to constantly declining exports and falling foreign exchange reserves.
This is also important to repay the domestic debt and foreign debt in order to save Pakistan from becoming a defaulting state in the coming years. Above all it is necessary to avail the opportunity of reaping CPEC related economic advantages to develop Pakistan’s economy in a reasonable time frame to meet its aforementioned obligations and finally to bring prosperity to Pakistan and its people.
In the light of above it is logical to say that Pakistan and China’s cooperation in the energy field is beneficial for both countries and CPEC is a project that helps Pakistan in meeting its energy shortages, and it will be equally beneficial to Pakistan and China to advance their economic interests. Rather CPEC related energy projects and trade will be much more beneficial to Pakistan to meet its above discussed economic challenges.
The Race for Universal Energy Access Speeds Up
Fondly referred to as “mini Africa” by local residents, Sabon Gari is one of Nigeria’s biggest markets, where you can find anything from electronics and clothes to toys and hardware. Shops here used to depend on expensive diesel generators for electricity. But today, thanks to a new solar mini-grid, shop owners say they now spend just a fraction of what they used to previously on electricity.
More than 5000 miles (8000 kms) away, in the remote island of Monpura in Bangladesh, Lhota Khatun runs her own sewing business out of her bedroom, thanks to a solar mini-grid installed on the island. Since 2016, she has had dependable electricity access that helps her work at night, after her children are in bed.
Sabon Gari and Monpura represent communities around the world that, today, are more productive and prosperous through reliable and affordable access to electricity.
Energy is at the heart of development. Access to electricity makes communities safer, helps small businesses thrive and powers essential services such as schools and clinics. It also helps provide a conducive environment for investments, innovations and new industries that spur growth and provide jobs for entire economies.
The World Bank constantly works with governments to tailor solutions to suit every country’s unique energy needs. These approaches, led by countries, are working.
For example, a new $350 million electrification program in Nigeria is expected to attract $410 million in private investment, and create a vibrant market for mini grid and off-grid energy solutions.
In Kenya, the World Bank supports more than $1.3 billion of generation, transmission, distribution and off-grid investments, helping the country more than double electricity access rates from 23 percent in 2009 to 56 percent in 2016. A new $150 million off-grid project is designed to provide service to another 240,000 households living in more remote and poorer areas.
And in Bangladesh, the World Bank supports the largest off-grid solar program in the world, powering over four million households through solar home systems, 1,000 solar irrigation pumps, and 13 solar-based mini-grids. More than 18.5 million people in rural Bangladesh now have reliable access to solar-powered electricity through this program.
Altogether, between 2014 and 2017, the World Bank helped deliver new and improved electricity services to more than 45 million people.
Progress has sped up. Sub-Saharan Africa’s electricity deficit has begun to close for the first time. India is bringing electricity to 30 million people a year – more than any other country. And a number of pioneering countries have put in place approaches that have allowed them to rapidly expand electricity services. Among these are a commitment to both grid and off-grid electrification efforts, long-term national electrification planning, and a focus on the quality and affordability of service.
The success of these approaches has led to a jump in demand from countries for support for energy access programs, which is being reflected in the World Bank’s portfolio. In recent years the World Bank provided an average of $900 million a year in energy access financing. This grew to $1.4 billion last year.
Support to mini-grid and off-grid programs is growing the fastest, from roughly $200 million a year in recent years to $600 million last year. The World Bank is on track to provide 20 percent of the projected investment needed for solar home systems in developing countries over the next four years.
The recent progress on energy access will be discussed as part of the review of global energy targets under Sustainable Development Goal 7 (SDG7) at the UN High-Level Political Forum. Underpinning these discussions is the fact that while progress is picking up towards universal energy access, more than 600 million people will still not have electricity access in 2030 if current trends persist. That could have a devastating impact on health, education and economic prospects for a significant part of the world’s population.
Accelerating progress will require the private sector to play a key role. The World Bank is actively mobilizing private investment for energy access projects by helping to put in place conducive policies, demonstrating viable business models, and providing targeted funding to leverage commercial financing.
In Haiti, a project supported by the World Bank and Climate Investment Funds establishes a fund that will provide grants and loans to mini- and off-grid businesses. The project is expected to eventually mobilize $45 million in private financing and help bring electricity to 10 percent of Haiti’s population.
Innovation and technology are also playing a key role. Geospatial mapping is changing the face of electricity planning, with unprecedented detail and accuracy on unserved populations. For example, the Nigerian Rural Electrification Agency is mapping more than 200 sites for mini-grid development based on this approach.
The World Bank is committed to help countries harness these innovations, whether technological, financial or on the policy side, to accelerate the expansion of reliable and affordable electricity services, and to end energy poverty once and for all.
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