The Battle for Xinjiang (and its energy riches)

One of areas of China bordering central Asia (including a small border with northern Afghanistan, which became important by accident during the U.S. invasion of that country in 2001) is China’s Xinjiang Autonomous Region. Over the past year, there have been a rising number of terrorist attacks on civilian targets in this region, and in other areas of China, performed by separatists from that Xinjiang Region.

Xinjiang, or the “New Frontier” from eastern China’s perspective sometimes, is formerly known as Chinese or East Turkestan in most maps from the Western World. It is China’s largest administrative area and is located in northwest China, north of the Tibet region. Very strategically, it shares borders with several former Soviet Republics, plus Afghanistan, Pakistan, and India.

Map of the de facto territory of the Xinjiang Autonomous Region in China. (Credit: TUBS - Wikimedia)

Map of the de facto territory of the Xinjiang Autonomous Region in China. (Credit: TUBS – Wikimedia)

Xinjiang is nearly evenly split between China’s overall majority ethnic group the Han and the ethnic minority Uighurs (also spelled Uyghurs) — who are the largest ethnicity in the Xinjian region, a situation which is highly unusual for Chinese minority ethnic groups nationwide and which has fueled a lot of tension.

Uighurs argue (probably correctly) that they are an oppressed minority in China. The Communist Party, in return, doesn’t trust them, both because they are dissimilar from the rest of the country and because they actively waged an Islamic insurgency during the 1950s against the People’s Republic of China. This rebellion was nominally in support of their Nationalist allies, who had fled to Taiwan after the end of the Chinese Civil War at the end of the 1940s, but was of course largely motivated by a desire for self-rule after many generations of outside domination.

In fact, Uighur support for the Nationalists was a rare exception to their historic trend of generally resisting all outsiders, including a Soviet invasion in 1934, the Russian Empire in the 19th century, and various Chinese dynasties that attempted to assert control over the area throughout history.

They are, essentially, another of the many small and diverse warrior cultures of Central Asia, which we’ve seen in action in Afghanistan and Pakistan throughout the 1980s, 1990s, and the past decade — except that they (now) happen to fall within China, on the map, as opposed to one of the “Stans.” And indeed they are more closely related to the ethnic groups in those areas than to the rest of China, which is one of the exacerbating sources of conflict.

The population, as is true of much of the Western half of China (outside of Tibet), is heavily Muslim. As a result — and due to its borders with Pakistan and Afghanistan — they have been somewhat accidentally caught up in the Global War on Terror.

But beyond the War on Terror, according to a report in The New York Times, there is also an almost mind-blowingly huge potential for energy production and distribution, which is being developed as fast as possible now. And that potential is probably the real reason the People’s Republic of China has been so determined since the 1950s — when the first very major oil field was definitively identified — to hold onto and dominate the Xinjiang region, especially now that the rest of China has such a large need for fuel and power.

At this point, Xinjiang’s strategic energy value is so high to the rest of China and the national government, that probably no amount of separatist unrest will shake them or slow down their energy economy development of the area. Here, from the Times report, is what they are working with …

Oil and gas production:

The foundation of Xinjiang’s energy economy is oil. Xinjiang has an estimated 21 billion tons of oil reserves, a fifth of China’s total, and major new deposits are still being found. This month, a state-owned oil company announced its greatest discovery of the year here, a deposit estimated to have more than one billion tons of oil on the northwestern edge of the Dzungarian Basin, not far from Karamay’s fields. Xinjiang is expected to produce 35 million tons of crude oil by 2020, a 23 percent increase over 2012, according to the Ministry of Land Resources.

Coal mining:

Xinjiang also has the country’s largest coal reserves, an estimated 40 percent of the national total, and the largest natural gas reserves. Those three components form an energy hat trick that China is capitalizing on to power its cities and industries.

Electricity exports:

The main state-owned electric utility, the State Grid Corporation of China, is investing $2.3 billion over the next year to build high-voltage lines, according to People’s Daily, the main party newspaper. Xinjiang will export electricity to more populated parts of China and perhaps to Central Asia.

Energy transit infrastructure:

“Xinjiang is where all the growth in oil, gas and coal is going to be coming from,” said Lin Boqiang, an energy scholar at Xiamen University and adviser at PetroChina, China’s biggest oil producer. “Second, all the imported resources from Central Asia, oil and gas, go through Xinjiang and then get distributed from there.”

Xinjiang produced 25 billion cubic meters of natural gas in 2012, and it aims to increase that to 44 billion cubic meters next year.

Pipelines already transport natural gas from Central Asia and Xinjiang to central and eastern China. A new pipeline from Western Siberia is expected to transport 30 billion cubic meters of gas per year through the Altai Mountains to central Xinjiang, where it would connect with domestic east-west pipelines.

In that light, probably the best the Uighurs of Xinjiang can hope for is additional autonomy (including religious and cultural identity autonomy, as well as freedom from ethnic and religious discrimination in government policy) and more importantly a new revenue-sharing deal to give them more of the export profits and a higher standard of living. Independence or maintaining a Uighur plurality in the region’s demographic breakdown (i.e. keeping out more Han Chinese residents and workers) are just probably not on the table anymore.

Western Libya militias move on eastern oil export terminals

According to the BBC, western Libyan Islamist militias this past weekend launched a surprise attack on the eastern / anti-Islamist controlled oil export terminals at Sidra and Ra’s Lanuf, two port cities just west of the approximate political dividing line between eastern and western Libya.

Map of the three pre-1963 Libyan provinces approximated over a map of present-day subdivisions. (Credit: Spesh531 - Wikimedia)

Map of the three pre-1963 Libyan provinces approximated over a map of present-day subdivisions. (Credit: Spesh531 – Wikimedia)

This is when things are going to get really real in Libya’s rising domestic conflict. Right now, as explained here previously, Libya’s oil export terminals at Sidra and other locations in the eastern end of the country are under control of the anti-Islamist “House of Representatives government” (HOR), based in Tobruk in the east, while the revenues from overseas oil sales are under the control of the pro-Islamist “General National Congress government” (GNC), based in in Tripoli.

But if the oil ports fall to the GNC, unifying control of both the exports and revenues under one side, what little cooperation remains between the two factions (by fiscal/economic necessity at the moment) will disintegrate. It will also put the HOR and its vaguely aligned anti-Islamist paramilitaries at serious risk of running out of funds for its payroll (and possibly trigger a very messy, major foreign intervention against the GNC).

Neither rival government currently has legal standing in Libya anymore, but the HOR faction has international recognition and was elected more recently.

What happens to Nigeria’s PDP if oil prices keep falling?

A lot of foreign policies and domestic spending programs in 2014 have, like the best laid plans o’ mice and men, been severely disrupted by the dropping world oil prices as supply jumps significantly. Those countries with a particularly heavy economic and governmental dependence on oil exports — including Africa’s largest economy, Nigeria — are especially susceptible to policy disruption.

On our upcoming episode of the “Arsenal For Democracy” show, my radio co-host Nate pointed out that if global crude oil prices keep falling, certainly Nigeria as a whole is going to be in for a pretty bumpy ride, but none more so than the country’s ruling party, the PDP. They’ve ridden the ten-fold increase in crude prices (higher even, at times before now) since taking power in 1999 to a lot of sketchy, payola-infused campaign victories. It’ll be much harder to buy votes, 15 years into power, if revenues drop sharply.
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Baghdad’s stalling of oil revenue talks is pushing Kurds out

The New York Times published an article on the latest efforts by the Kurdish Regional Government to go their own way from central Iraqi control on oil production and sales, in light of continued failure to negotiate new terms for revenue sharing.

The current arrangement is an 83/17 revenue split, with the national government in Baghdad on the high side, which hardly seems reasonable. I think it’s somehow derived from 17% of the reserves being in Kurdistan, but even that doesn’t make much sense (especially when so much of the past couple years’ rise in Iraqi production and new development contracts have been on Kurdish land and via the regional government). And the article suggests that the resistance by Baghdad to changing the arrangement is fueling a rapidly accelerating cycle of mutual non-cooperation that will probably end in an independence attempt:

The more Kurdish officials developed their oil industry, the more Baghdad balked. The more the central government restricted the Kurds, the more they felt like they had no choice but to press forward.

“Their policy is actually backfiring,” said Howri Mansurbeg, a professor of petroleum geosciences at Soran University in Kurdistan, said of Iraqi officials. “They want to prevent a Kurdish state, and now the exact opposite is happening.”

Maybe there would be a case for such an unbalanced ratio if Baghdad provided tons of services and defense to the Kurdistan Region, but they’ve done jack for them … and then have demanded everything from them, after the national security forces literally threw their weapons on the ground and ran away.

At the point Maliki handed Kirkuk to the Kurdish Regional Government to take care of, and their forces held it successfully, I think they earned the right to a lot more revenue. (And — as the Times points out, matching my analysis at the time in June — at the point he handed them Kirkuk, he also handed them enough oilfields to become independent.)


Despite a rising war, Libya’s oil keeps flowing

There are now two rival governments in Libya, an unrecognized one in the western capital and an internationally recognized (and elected) one in the eastern city of Tobruk. From physical infrastructure to virtual infrastructure, everything is a target for the rivals. Politically and militarily, the western faction seems to have gained the upper hand for the moment, but on the economic front, the eastern faction is still maintaining competitive dominance in the battle for control and influence.

Libya is a country with one of the largest oil reserves in the world, and unsurprisingly one of the biggest political struggles between the rival governments is over effective control of the oil production, sales, and revenues — as explained by Jason Pack and Rhiannon Smith:

This battle for legitimacy and power is being played out within Libya’s two most influential institutions: the Central Bank and the National Oil Corporation (NOC). The HoR voted in September to dismiss Sadiq al-Kabir from his position as Central Bank governor, however Kabir appears to still be running the bank. Through him, the Islamist-aligned government has at least some control over Libya’s finances.

Last week, the Central Bank transferred Hassi’s [unrecognized] government enough funds to cover three months of family allowance payments, while a GNC-controlled public spending authority [allied with it] has managed to impose a payment limit of 200,000 Libyan Dinar across the public sector.

Meanwhile, Hassi’s Oil Minister Mashallah al-Zwey has physically taken over the NOC headquarters in Tripoli along with the NOC website. As such, officials are reportedly taking direction from him. Indeed, the official Libyan government website has been taken over by Hassi’s National Salvation government. Those cyberspace realities go a long way to validating the Tripoli government’s claim to sovereignty and legitimacy.

Based on this, one might expect a total breakdown in cooperation on oil between the rival factions. Instead, production is up and revenues are continuing to be distributed across the country. It’s a bit haphazard, to be sure, but they haven’t stopped.

Why? The realities of the complex setup of pre-Gaddafi oil royalty systems and citizen salaries, crossed with the international oversight of the country’s oil sector following the 2011 civil war, have resulted in a bizarre and almost amusing level of cooperation, even as the two factions send wave after wave of militias and soldiers and jets at each other.

Here’s the basic setup according to Reuters:

  1. Oil comes out of the ground all over the country.
  2. Oil is largely shipped to export terminals in eastern Libya controlled by the recognized government.
  3. Oil is sold legally on the international market by brokers.
  4. Money from these sales is deposited directly into an overseas account established by the international community.
  5. The only entity able to access the money overseas to bring it back to Libya is controlled by supporters of the unrecognized government and the western rebels.
  6. Most of the oil money brought back into Libya is paid to average citizens, fighters, soldiers, police, etc. in all areas of the country under a system established by Gaddafi. All beneficiaries nominally “work” for the government (either one) in jobs that may or may not exist.

If you detected a bit of a mutually assured destruction or prisoner’s dilemma-style roadblock in there, so did pretty much everybody involved, which is apparently why the two rival forces haven’t stopped the oil party.

When everyone in Libya is employed in a no-show government job funded by oil revenues, everyone in Libya is committed to keeping the oil flowing and being sold legally, despite their differences, even in the middle of what has clearly become a new civil war. Since Western rebels control the payouts and the Eastern government controls the exports, it’s important for everyone to work together even as they’re at war — or else nobody gets salaries. Without salaries, and barring substantially more proxy aid from the Persian Gulf, both sides would collapse as their hired combatants suddenly exit the war.

Unilaterally halting the exports automatically halts the revenue stream, while unilaterally halting the revenue payouts would trigger retaliatory cancellation of the oil exports. The only self-preserving and logical course, therefore, is for neither side to try to hold the other hostage on the oil cycle, at least until both the revenue transfers and exports are controlled by the same side, whether by force or by the international community intervening on the funds repatriation process.


Climate policy: Disengage “stakeholders”?

Perhaps there has been too much engaging of certain uncooperative and undermining stakeholders in the climate change policy discussions. As one of the world’s largest climate action protests ever unfolded this weekend, Anna Lappé makes that case in a new Al Jazeera America op-ed entitled “What climate activists can learn from the fight against Big Tobacco”:

Progress has been stalled in part because the biggest polluters in the world — those oil and gas companies responsible for the lion’s share of emissions, for example — have been given a seat at the negotiating table, treated as partners and stakeholders at the annual global meetings called the Conference of Parties, or COP. Over the years, these COPs have featured industry-sponsored pavilions, dinners and breakaway meetings. And companies have been granted official observer status through their industry trade associations, which are considered nongovernmental organizations under current climate meeting rules. Some have even attended as official members of country delegations. (For instance, a representative from Shell joined the Nigerian delegation to COP16 in 2010 and Brazil’s to COP14 in 2008.)

As climate activists call for governments to take real action on climate, the decades-long fight against Big Tobacco — specifically, how public health advocates successfully kept companies away from the negotiating table — holds powerful lessons for the role industries should have in these key talks.

It would be one thing if the oil and gas companies were actively interested in pursuing new energy strategies or diversifying their future plans into new and cleaner areas, but as she notes they are spending a lot of money trying to undermine the case that new regulations or laws are even needed in the first place. And in that regard they are probably forfeiting their right to have a seat at the table as stakeholders.

Incidentally, that mention of the Shell rep serving on the delegation from Nigeria in 2008 and 2010 is very unsurprising. As I explored in an article in January 2011, entitled “The Nigerian Republic of Royal Dutch Shell”, on the Nigeria-specific revelations from the leaked diplomatic cables a few years ago:

Royal Dutch Shell has essentially become, according to the company itself, the industrial octopus inside Nigeria’s government, even in the “democratic” era…

The ambassador reported: “She [Ann Pickard, then Shell’s vice-president for sub-Saharan Africa] said the GON [government of Nigeria] had forgotten that Shell had seconded people to all the relevant ministries and that Shell consequently had access to everything that was being done in those ministries.”

Until now, most of the discussions have included oil and gas lobby folks on the theory that their “buy-in” would be critical to producing actionable plans for dealing with climate change. But what if they just refuse to buy-in? It should be clear after more than two decades of efforts that they aren’t really interested in taking the transformative steps necessary to bring their businesses into the future. At this point, they have too much influence at the table, rather than not enough. The fight against Big Tobacco is probably a useful analogy.

Dark clouds of smoke and fire emerge as oil burns during a controlled fire in the Gulf of Mexico, May 6, 2010. The U.S. Coast Guard, working with BP, local residents and other federal agencies, conducted the burn to help prevent the spread of oil following the explosion on Deepwater Horizon, an offshore drilling unit. (Credit: US Navy via Wikimedia)

Dark clouds of smoke and fire emerge as oil burns during a controlled fire in the Gulf of Mexico, May 6, 2010. The U.S. Coast Guard, working with BP, local residents and other federal agencies, conducted the burn to help prevent the spread of oil following the explosion on Deepwater Horizon, an offshore drilling unit. (Credit: US Navy via Wikimedia)

Why Brunei? How a tiny, anti-gay monarchy became a U.S. ally.

brunei-map-ciaSecretary of State John Kerry and the Obama Administration are now (justifiably, I’d say, at this point) taking huge heat for trying to cement a major alliance with the podunk Southeast Asian absolute monarchy of Brunei.

President Obama himself had been scheduled to travel to Brunei last fall during the trip to Indonesia, which the government shutdown canceled. Last year, he called the Sultan “a key leader in the Southeast Asia region and also widely respected around the world.”

Outrage has been stirred up with the long-planned launch in April by the government of a phased rollout for an elaborate new penal code with extreme religious conservatism based in hardline Sharia Law interpretations. In particular, U.S. LGBT activists in California are furious over the draconian anti-gay provisions and have been organizing boycotts against local Brunei state investments.

But the anti-gay problem is just the tip of the horrible, no good, very bad legal iceberg for the monarchy with fewer residents than Boston. At least a fifth of the country’s population is non-Muslim, which is now punishable with death by flogging. Interfaith marriages are now adultery, punishable with death by stoning. Breaking the laws of Brunei while outside the country (i.e. in neighboring Malaysia, also located on the island of Borneo) is also to be punishable under Brunei rules.

So why has the U.S. State Department been trying so enthusiastically to secure a partnership with the Sultanate of Brunei and its ironically named Abode of Peace?

Because it’s got a ton of natural gas and oil relative to its size (35th biggest oil exporter and 26th biggest gas exporter in the world), it’s an original member of the proposed Trans-Pacific Partnership free trade agreement, it’s strategically located on the South China Sea coast, it’s been a counterterrorism partner since 2001 … and I guess they weren’t expecting it to go way off the deep end suddenly like this.

But really, I think the warning signs should have been there. Generous oil-funded social welfare policies aside, Brunei has not been cool people for quite some time now. Their human rights abuses, near total lack of civil rights, and obvious authoritarianism were pretty well known before now. The former British protectorate and past regional sea empire has been ruled by one dynasty with a pretty ironclad fist for six centuries.

Some of the pretend constitution’s provisions have been ignored for so long by the monarchy that the country hadn’t even gained independence (1984) at the time they were suspended formally, in the 1960s. The safe money would have been on further regression, not a dramatic improvement, for all the signs the world has been picking up from Brunei in the past decade.

One of those signs? According to the Boston Globe, it should have been the 2013 global human rights report from… drumroll please… the U.S. State Department:

…the State Department’s 2013 global human rights report criticized Brunei for its restrictions on religious freedom; exploitation of foreign workers; and limitations of the freedom of the press, assembly, and association as “the most prevalent human rights problems.”

It went on to mention the adoption of the new legal code based on religious Sharia law but noted that “the effect of the law will not be clear until it is implemented, which was scheduled to begin in phases starting in April 2014.”

Nobody could have predicted…

But it seems that finishing a free trade deal with such a pivotal player was too much to pass up. It’s interesting that nearly 600 years after Brunei rose to power by controlling water trade and coastal ports in the dense commercial shipping zone not far from the Spice Islands, it’s leveraging the exact same strategic economic power to do whatever it wants. I guess it’s true what they say!