The world as we know it could be a different place in next two decades. Perhaps one of the most important changes that may occur is the rise of Asian powers. It is true that predicting the future process is not easy and never safe. However, the emergence of China and India as global powers may become inevitable and may have significant implications for the Gulf region and beyond.
Carnegie Endowment for International Peace, in its new publication “Crux of Asia: China, India and the Emerging Global Order” highlights this historic transformation in the coming decades by saying “as the two powers [China and India] grow, they are bound to change the current international system-with profound implications for themselves, the United States, and the world.” Furthermore, The U.S. National Intelligence Council (NIC) in its latest report “Global Trends 2030: Alternative Worlds,” describes a world that will be radically transformed from what we know today. “By 2030,” the report says, “Asia will be well on its way to returning to being the world’s powerhouse, just as it was before 1,500.” It predicts a diffusion of power across the world, as U.S., European, and Japanese share of global income is projected to fall from 56 percent today to well under half by 2030.
Thirst for the Gulf oil
These spectacular economic growths of China and India require enormous amounts of energy to ensure that it continues over the coming decades. Thus, China and India are expected to remain as the twin engines of global oil demand growth over the next two decade on the back of strong economic growth. The numbers behind China and India’s seemingly insatiable thirst for energy are mind-boggling. For example, Chinese demand for petroleum reached over 9.5 million barrels per day (mb/d) in 2012, and is projected to jump to around 16-17 in 2030. Although China has massively increased its refining capacity to meet most of its current and projected needs, the OPEC’s “World Oil Outlook 2012” estimates that China will still need to import over 12 million barrels of crude oil in 2030, up from 5.5 million barrels last year. This means 70 to 80 percent of China’s crude oil needs will be from imports mostly from the Middle East.
The numbers for India are smaller but still overwhelming. India consumes 3.6 million barrels per day, two-thirds of them imported mostly from the Middle East. According to EIA’s analysis of projected trends, India will eventually be importing around 5-6 million barrels per day, roughly 90 percent of its future petroleum needs. Despite their developmental similarities, some experts believe that China and India’s bilateral strategic rivalry means that they have competing priorities on most major global issues even in the Middle East. Consequently, what are the implications for the Arab Gulf States? Will the Gulf States ally itself with one party against the other? Or will one of the two countries (china and India) work on the exclusion of the other in the Gulf?
Interdependence at work
Today about two thirds of the Gulf region energy exports go to Asia. The International Energy Agency (IEA) expects energy trade between the Middle East and Asia to grow rapidly in years to come as the U.S. moves towards energy self-sufficiency. Asia could account for up to 90 per cent of oil exports from the Middle East in the future. Furthermore, in light of the developments “The Arab Spring” that have swept the Middle East and North Africa and continues to evolve so far, the spotlight on Gulf-Asia relations is of great significance, as the confidence in U.S. power is eroding. This is in addition to the volume of trade between the two Asian giants, China and India, and the Gulf States are growing rapidly. For example the bilateral trade between GCC and China exceeded $ 133 billion and with India hit over $ 141 billion in 2011 according to latest UN’s Comtrade data. Not to mention the millions of Indian workers in the region, and the interests of the Indian and Chinese companies which are growing strongly in the region.
Indeed, both China and India have become more economically interdependent with the Gulf and the two countries will not be able to exclude each other from the region. As big importers of natural resources, India and China, will benefit from and may actively seek to promote stability in the Middle East. Additionally, China and India have a high level of dependence on energy imports, particularly oil; they are exposed to the same risks of the international oil markets. Therefore it is in the interests of both countries to cooperate together towards price stability and keeping reliable oil supplies.
Meanwhile, the Middle East oil producers export more oil to Asia than to Europe and North America combined. In fact, about two-thirds of GCC oil exports are channeled to the Asia. The Asian Pacific countries, individually and collectively, are heavily dependent on oil from the Gulf. According to the U.S. Energy Information Administration (EIA) Japan sources roughly 80 percent, South Korea 75% and India imports almost two thirds of its oil from the GCC states. The International Energy Agency (IEA) forecasts that China will import 70% of its oil from the GCC by 2015. India is projected to replace Japan and emerge as the third-largest consumer of energy (after the United States and China) by that time. The bulk of Indian supplies come from the Gulf and in particular Saudi Arabia; this dependency is expected to change only marginally in the next decade.
In this geopolitical environment; China and India are acting in the economic interdependence model, and there is no evidence to suggest otherwise. Firstly, the two countries will depend on the import of large quantities of oil from the Middle East and the GCC; therefore, the stability of the region is in their interest. Secondly, the GCC states and most of the Middle East countries do not allow investments in the upstream oil sector (exploration and production), thus there is no room for competition between Chinese and Indian firms in that sector. Thirdly, both China and India do not yet (and maybe decades to come) have the capabilities to deploy significant naval forces in the Middle East and Indian Ocean and will remain dependent for the time being on the U.S. presence. Fourthly, The GCC countries survival depends on oil exports to sustain their economies, thus they will not encourage any party against the other in order to ensure stable markets for their energy supplies. Fifthly, the fight against terrorism and prevent the spread of nuclear weapons are also a common interest for all Asian countries. Last but not least, it is arguable that it is in the interests of both countries to enhance their collective leverage over energy suppliers.
Above all, the position of the two countries regarding the Arab issues are closer to each other (and the Arab countries) more than to Washington. This is clearly reflected in their political attitude of the two countries towards Palestine, Bahrain, Syria, Libya, Iran’s nuclear program, climate changes and many other issues. In this context, common interests suggest that intense security competition between the two countries over Middle East’s oil in the next two decades is unlikely. Indrani Bagchi a leading foreign policy journalist and the diplomatic editor at The Times of India once eloquently summarized the evolving Indo-China relationship as “competition on some levels and co-operation on others (…) but conflict is most unlikely.”
Dr. Naser AL-Tamimi is a UK-based Middle East analyst and Al Arabiya’s regular contributor with particular research interest in energy politics and the political economy of Saudi Arabia, the Gulf and Middle East- Asia relations. The writer can be reached at: firstname.lastname@example.org