1 THE CHINA AND EURASIA FORUM QUARTERLY Central Asia-Caucasus Institute & Silk Road Studies Program Volume 3, No. 3 November 2005 Energy and Security The China and Eurasia Forum Quarterly is a Central Asia-Caucasus & Silk Road Studies Program publication. The Central Asia-Caucasus Institute and the Silk Road Studies Program is a joint transatlantic independent and externally funded research and policy center. The Joint Center has offices in Washington and Uppsala, and is affiliated with the Paul H. Nitze School of Advanced International Studies of Johns Hopkins University and the Department of East European Studies and Peace and Conflict Research of Uppsala University. It is the first Institution of its kind in Europe and North America, and is today firmly established as a leading center for research and policy worldwide, serving a large and diverse community of analysts, scholars, policy-watchers, business leaders and journalists. The Joint Center aims to be at the forefront of research on issues of conflict, security and development in the region; and to function as a focal point for academic, policy, and public discussion of the region through its applied research, its publications, teaching, research cooperation, public lectures and seminars. Upcoming Issues: * Narcotics – February 2006 (deadline for submissions: January 31) * Terrorism – May 2006 (deadline for submissions: April 31) * Soft Security Threats – August 2006 (deadline for submissions: July 31) Subscriptions: Subscription inquiries and requests for hard copies should be addressed to: The China and Eurasia Forum, The Central Asia-Caucasus Institute, Paul H. Nitze School of Advanced International Studies, 1619 Massachusetts Ave. NW, Washington, D.C. 20036, United States or The China and Eurasia Forum, The Silk Road Studies Program, Uppsala University, Box 514, SE-751 20 Uppsala, Sweden. E-mail: [email protected] or call +46 - 18 - 471 72 63. Visit our Website at: http://www.chinaeurasia.org Printed in Sweden by Uppsala University © Central Asia-Caucasus Institute & Silk Road Studies Program, 2005. The China and Eurasia Forum Quarterly (ISSN 1653-4212) is published four times a year by the Central Asia-Caucasus Institute & Silk Road Studies Program <www.silkroadstudies.org>. Map used in the cover design is courtesy of the University of Texas Libraries, The University of Texas at Austin. THE CHINA AND EURASIA FORUM QUARTERLY Volume 3, No. 3 November 2005 Editor-in-Chief Niklas Swanström Central Asia-Caucasus Institute and Silk Road Studies Program Johns Hopkins University & Uppsala University This publication was made possible with the support of The Swedish Ministry for Foreign Affairs THE CHINA AND EURASIA FORUM QUARTERLY EDITORIAL BOARD Editor-in-Chief Niklas Swanström Central Asia-Caucasus Institute and Silk Road Studies Program Johns Hopkins University, U.S. & Uppsala University, Sweden E-mail: [email protected] Assistant Editors Christopher Len Central Asia-Caucasus Institute and Silk Road Studies Program Uppsala University, Sweden E-mail: [email protected] Nicklas Norling Central Asia-Caucasus Institute and Silk Road Studies Program Uppsala University, Sweden E-mail: [email protected] Senior Advisors Daniel L. Burghart Malia K. Du Mont National Defense University, Co-Founder of the China-Eurasia Forum United States and Former Associate Editor of the CEF Quarterly. Currently at the CNA Svante Cornell Corporation, United States Research Director of the Central Asia- Caucasus Institute & Silk Road Studies Matthew Oresman Program, Sweden Co-Founder of the China-Eurasia Forum, Former Director of the China-Eurasia David M. Finkelstein Forum and Former Editor of the CEF The CNA Corporation, United States Quarterly, United States Pan Guang S. Frederick Starr Shanghai Academy of Social Sciences, Chairman of the Central Asia-Caucasus China Institute, United States Bates Gill Farkhad Tolipov Center for Strategic and International University of World Economy and Studies, United States Diplomacy, Uzbekistan Zhao Huasheng Dmitri V. Trenin Fudan University, China Carnegie Endowment for International James A. Millward Peace, Russia Georgetown University, United States THE CHINA AND EURASIA FORUM QUARTERLY Volume 3, No. 3 November 2005 Contents East Asia and the Middle East: A Fateful Energy Embrace Kent Calder..................................................................................................................5 Quest for Oil and Geostrategic Thinking Ingolf Kiesow ..............................................................................................................11 China’s Energy Dependence on the Middle East: Boon or Bane for Asian Security? Phar Kim Beng and Vic Y.W. Li ............................................................................... 19 China’s Foreign Energy Asset Acquisitions: From Shopping Spree to Fire Sale? Maria Kielmas...........................................................................................................27 The New Natural Gas-Based Technologies in the Context of Northeast Asia Vladimir I. Ivanov ......................................................................................................31 China’s Energy Security Demands and the East China Sea: A Growing Likelihood of Conflict in East Asia? Arthur S. Ding........................................................................................................... 35 China’s Energy Security and Its International Relations Zha Daojiong.............................................................................................................. 39 The Dilemmas of China’s Energy Governance: Recentralization and Regional Cooperation Gaye Christoffersen ................................................................................................... 55 An Asian Oil and Gas Union: Prospects and Problems Niklas Swanström...................................................................................................... 81 China, Kazakh Energy, and Russia: An Unlikely Ménage à Trois Stephen Blank.............................................................................................................99 The Dragon and the Magi: Burgeoning Sino-Iranian Relations in the 21st Century J. Brandon Gentry ......................................................................................................111 Japan’s Central Asian Diplomacy: Motivations, Implications and Prospects for the Region Christopher Len.........................................................................................................127 Editor’s Note Dear Colleagues and Friends, This is the first issue of the CEF Quarterly under new directorship. The former editors, Matthew Oresman and Malia Du Mont have stepped down. We are very grateful for their work and will try our very best to continue the success of the China and Eurasia Forum. Besides ensuring the quality of the CEF, we would also like to explore new ways to reach out to our members and to make news and information on China-Eurasia more accessible. Since taking over, we have developed the homepage and introduced a weekly newsletter for our members. Readers are invited to visit our homepage and utilize the news archive. Concerning the CEF Quarterly, we decided on a topical approach so that every issue would cover a particular topic in-depth, even if we still accept interesting off-topic articles. The China-Eurasia region is currently under-going a lot of change and the respective governments are faced with a numerous challenges. In this issue, we focus on the topic of Energy and Security. Energy security has become one of the most important issues in international relations today. Demand for energy is on the increase, especially in Asia, where rapid modernization has led to rising consumption. As a result, there has been growing competition between states to secure their energy supplies with access to oil and gas becoming increasingly a matter of national security. The recent U.S. reaction to the Chinese bid on Unocal underlines the impact of energy security on politics. Oil and gas markets have become strategic assets in a political and economic struggle over influence and domination, at least this is what many states and policy institutions perceive as the reality. In no region is this more apparent than in China-Eurasia. With energy security a major consideration for the governments in this region, the energy sector has not been left to market forces alone. Governments retain strong control of the sector through regulation, ownership and state investment. With high and concerted levels of political engagement by the respective governments, energy security considerations naturally resonate through the foreign policies of these governments. The lack of cooperation in these issues in the region is very apparent and cooperation that is initiated is either bilateral or trilateral. Multilateral structures that has been initiated has either excluded a region, such as APEC Energy Working Group, that do not include Central Asia despite its importance for Northeast Asia in energy terms, or has stagnated due to political considerations. This point to that Eurasia is in a dire need of an effective organization that could coordinate energy cooperation and tie together both economic considerations and affect the political landscape positively with strong regional integration. Parts of the region have also been blessed with significant energy resources, energy resources that has not been