Reserves in northern China are practically extinct. New oil fields in Xinjiang are very hard to exploit. Two-thirds of China's oil imports are from the Middle East: the main suppliers are Iran, Saudi Arabia, Oman and Yemen. In 2010, they could be responsible for 80 percent of China's needs. No wonder Beijing is so worried.
Iraq contributes only 0.6 percent of Chinese oil imports - but its strategic importance is increasingly vital. China wants an immediate end to the UN embargo and sanctions. In 1997, China National Petroleum Corporation (CNPC), along with China North Industries Corporation (Norinco), signed an agreement with Iraq for a 22-year-long exploitation of half the Al-Ahdab field. The Chinese were supposed to invest $1.3 billion. In 1998, CNPC kept negotiating for an agreement regarding the Halfayah field. But in the end - because of the sanctions - the Chinese were only able to conduct feasibility studies.
China has been playing an extremely active role behind closed doors in the current negotiations on the text of the new Security Council resolution on Iraq and arms inspections. The dispute only apparently is between a US-led and a French-led text. UN sources confirm the Chinese align with the French position - even though President George W Bush has said that he had a "deal" after he met Chinese President Jiang Zemin in Texas at the weekend. China is positively against an American attack on Iraq: it fears subsequent sky-high oil prices or even the interruption of supplies.
China is also setting up its own strategic oil reserve. Reserves for the moment would only last for a few days. US reserves are good for three months. Until 2010, the Chinese want to be in the same position. The heart of the matter for China is to be less dependent on Middle East oil. Middle East oil travels through the Malacca Straits - controlled de facto by the US. Chinese oil companies have been increasingly active in Kazakhstan. But now, with the American presence in Afghanistan, it's for the Chinese to make the next move: how to combat encirclement by America from the Eastern and Western fronts.
Security Council members China, Russia and France will only follow Washington's plans for regime change if they are absolutely sure of a level playing field in a post-Saddam Iraqi oil industry. Meanwhile, a doomsday scenario is deeply bothering Bush-Cheney and the American oil army: attack against Iraq. Middle East in flames. $60 a barrel of oil. Game over.
But hopes are high on a dream scenario. Saddam is out in no time. Negligible "collateral damage". Iraq starts pumping oceans of oil. The Organization of Petroleum Exporting Countries is knocked out. $10 a barrel of oil. Victory.
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