Is the U.S. pulling out of the Middle East while China's role in the region grows? The U.S. has withdrawn its troops from Iraq and is withdrawing them from Afghanistan. It is also becoming less dependent on imported oil, especially that from the Persian Gulf. U.S. reluctance to get involved in the fighting in Syria or to go beyond economic sanctions in the conflict with Iran also suggests its desire to retreat from the region. On the other hand it remains the main interlocutor between Israel and the Palestinian Authority, and the U.S. Navy’s Fifth Fleet, numerous U.S. military bases, and approximately 40,000 troops remain in the Gulf.
China's interests are mainly economic: it needs oil if its economy is to continue growing. The imminent emergence of China as the world's largest net oil importer has been driven by steady growth in demand, trade, power generation, transportation sector shifts, and refining capabilities and flat demand for oil in the U.S. market. China is undiscriminating in its relations with other states and so has close links with some of the worst regimes in the region, such as Sudan, and is willing to trade with Iran as well as Iraq and others. While this is largely explained by its need for oil, the reality is more complex.
Table 1 shows how China's merchandise trade with the Middle East (including Israel but not North Africa) has grown much faster than that of the U.S. In 2012, its exports to the region were 23 percent larger than those of the U.S. while its imports were 21 percent higher.
Table 1:Trade with the Middle East ($ billions)
The main reason for this growth was that China imported more oil from the Middle East than any other part of the world and these imports increased rapidly. In 2011, it imported 2.9 million barrels per day (mb/d) of Middle Eastern oil, which accounted for 60 percent of its oil imports. In the same year, the United States imported 2.5 million barrels per day of oil from the Middle East, accounting for 26 percent of its total oil imports.
According to China’s Development Research Center of the State Council, if consumption is not curbed by 2030, China will then import about 75 percent of its oil. China is set to surpass the United States this year as the world's largest oil importer and much of this will come from the Middle East. In 2012, oil accounted for about 18 percent of Chinese energy consumption while coal accounted for almost 70 percent. In the United States, oil accounted for 37 percent of energy consumption and coal accounted for 22 percent. The international oil market is therefore, in some respects, even more important for the United States than for China, both directly as a source of energy for its economy and indirectly as a source for its allies.
Decreasing United States reliance on Middle Eastern oil, coupled with rising Chinese dependence has significant geopolitical implications, according to the Chinese report. While the United States will not abandon its oil interests in the Middle East, its efforts to support democratic movements in the region will not be as constrained as in the past by its need for oil, according to the report, with the result that international energy markets will become more unstable. China should therefore decrease its reliance on oil imports from the Middle East.
The International Energy Agency (IEA) projects that the U.S. oil imports from the Middle East will fall from 1.9 million b/d in 2011 to 100,000 b/d or 3 percent of total oil imports in 2035 as a result of increasing domestic oil production and decreasing demand. In contrast, China’s oil imports from the Middle East are projected to grow from 2.9 million b/d in 2011 to 6.7 million b/ or 54 percent of total oil imports in 2035. This will leave China increasingly exposed to the vagaries of Middle East politics while the U.S. becomes less so, which could result in an increased Chinese strategic reliance on the U.S.
Table 2: Chinese Oil imports, 2010-2013 (millions of barrels a day)
In 2001 the Persian Gulf accounted for 23 percent of U.S. oil imports, while in 2013 it accounted for 20.5 percent. During that period, the total volume of oil imported by the U.S. fell by 20.5 percent while that from the Gulf declined by 27 percent. U.S. annual oil production rose by nearly 30 percent between 2011 and 2014 to nearly 13 million barrels per day, primarily from shale oil, tight oil, and Gulf of Mexico. In the meantime, Chinese production has increased at a much lower rate – 6 percent over this period – and is forecast to be just a third of U.S. production in 2014. On the demand side, China's liquid fuel use is expected to grow by 13 percent between 2011 and 2014 to more than 11 million barrels per day while U.S. demand hovers close to 18.7 million barrels per day, well below the peak U.S. consumption level of 20.8 million barrels per day in 2005.
In January 2014, China had 24.4 billion barrels of proven oil reserves, 0.7 billion barrels more than in 2013. It total oil production, the fourth largest in the world, has risen by about 54 percent over the past two decades and serves only its domestic market. However, production growth has not kept pace with demand during this period. In 2013, China produced an estimated 4.5 million barrels per day (mb/d) of total oil liquids, of which 93 percent was crude oil. The U.S. Department of Energy's Energy Information Administration (EIA) forecasts that by the end of 2014 China's oil production will increase to about 4.6 mb/d. Over the longer term, the EIA projects steady growth for China's oil and liquids production, reaching 4.6 m b/d in 2020 and 5.6 mb/d by 2040.
Table 3 compares the sources of energy used in the U.S. and China. Oil is nearly twice as important in the U.S. as in China. Coal dominates energy consumption in China and is domestically sourced. There is strong domestic and international pressure to reduce reliance on coal given that it is such a polluting fuel. China will continue to import more oil and the Middle East is an ideal source, despite its political instability. In contrast the U.S., blessed with shale resources and will need to import less oil over time.
Table 3: U.S. and Chinese Energy Consumption, 2012 (million tons of oil equivalent; for oil: millions of tons)