Foreign Policy Blogs

The Global Oil Race: China Seeks a Significant Foothold in the Americas



There is much debate in the United States on the dominance of China in the current global economy. These discussions are quite valid as Latin America weathered much of the 2008 economic crisis based upon natural resource exports to China to bolster their booming economy. Canada was also able to rely on natural resources to keep its economy above water since 2008 with exports to the U.S. and China. America’s neighbors, however, are turning to China due to its healthy economy and apathetic policies coming from the U.S. over the last decade towards its own backyard. The lack of concrete and consistent U.S. attention towards Latin America and the waffling on the Keystone pipeline from Canada has left many of America’s neighbors baffled at the under-utilized pull the United States has in its own neighborhood. Considering security threats towards the U.S. and its allies coming from Iran, Canadian Keystone supporters are puzzled by the consistent pauses in accessing North American fuel resources over oil that comes from regions where conflict is a constant.

China is in a unique position in history as it is at the end of its manufacturing boom and cash rich époque and is becoming well aware of its own demographic challenge that may derail its rapid development. Currently, China is seeking to transform itself into a knowledge economy while it has the resources and power to make lucrative R+D deals and build the educational infrastructure to push China into a healthier future. The major policy motivator is the age of workers in the manufacturing sector in China. Chinese workers consist of individuals who have one child or less and who are approaching retirement age in the next ten years. This reality has moved China’s manufacturing growth policy towards diversifying and modernising its economy so that growth can continue when manufacturing the world’s consumer goods has tapered off from current export levels.

The other priority for China is to secure the R+D and resources to support its current boom and gain the know-how to access its own natural fuel resources in the future. Over the last few years, Chinese oil firms have purchased wholly or in part many oil and gas reserves in South America. These purchases, while lucrative, also were done in a way that did not take full advantage of the extraction and use of the resources and were done in a somewhat disorganised way so that the final sale of the product did not always directly benefit China’s oil security. Enter Keystone, while the U.S. still debates and tries to decide on the costs and benefits of Canadian oil and its accompanying pipeline, the Canadian government debates whether or not a pipeline to the British Columbia coast would be a better option in order to sell fuel resources to Asia, more specifically, China. In order to secure a better option for China, Chinese oil firm CNOOC is seeking more lucrative and organised benefits in the Americas. CNOOC is currently is trying to purchase a large Canadian oil firm in Alberta, Canada, in order to create a base of operations in Calgary, offer stock trading in Toronto’s Stock Exchange and gain the R+D to access hard to extract oil and gas reserves in China itself.

This Calgary office in the heart of North America’s largest oil and gas reserve is a reflection of China’s more sophisticated resource policy growing into a new phase after years of sloppy oil policy in Latin America and Africa. For America’s neighbours, allies still always seek the greatest benefits for their own economic conditions. A lack of assertiveness in U.S. policy towards its neighbors may hurt the US more than its neighbours. After a decade or more of U.S. attention towards the Middle East, a holistic approach to U.S. foreign policy is the only way to work out some of the inconsistencies in U.S. policy abroad, to only be decided after the election of course.

  • Kathleen Millar

    Excellent points. While the US dithers about its burdensome loyalty to Gulf oil and the status quo (encouraged by the oil lobby), China reaches out for Canadian energy sources–no doubt intent on using US hestitation re the Keystone pipeline to seize the opportunity for itself and to build a pipeline designed insead to funnel fuel to Asia–as you say, ‘China in particular.’ Does US allegiance to the Mideast, however, turn on foreign policy considerations or is influenced by financial considerations, ie, recognition of the infrastructure and investment major oil companies still possess in that region, the money they would lose in those investments by transferring their attention to Canada, and the additional startup costs linked to the Keystone pipeline? The question is how to make a transference from Mideast oil to Canadian energy economically palatable to corporate oil interests–only then, apparently, will the process become politically palatable to Washington.

  • Richard Basas

    Hello Kathleen,

    Thank you for your kind comments. I wished to clarify some aspects of the article as I believe it is as much the political push by America’s neighbours as it is Chinese foriegn policy needs dictating policy towards selling oil and gas away from Keystone XL and towards China. I believe in the Canadian example, it made sense to expand towards the US as well as Asia, as Canadian oil firms wish to maximise profits of course. The western provincial pipeline was a response to the US not affirming Keystone, but I believe both the Canadians and many American officials will likely start the pipeline after the election, no matter who wins. While the western pipeline does benefit China, I believe it is more of a benefit to Canada so they can start to sell fuel products east, while at the same time pressuring the US on Keystone XL and planning to sell oil and gas to both the US and China.

    It is hard to say how much influence Mid East oil has over the US-Canadian relationship, but the arguement pro-pipeline advocates in Canada have made is that Mid East oil, like blood diamonds, is conflict oil. Canadian oil in their opinion is conflict free and does not engage US troops abroad nor puts the rights of its citizens in question due to its extraction or power dynamic in Canada. The main opponents of the pipeline for advocates in Canada and the US have been environmental groups who claim that oil sands production is inheriently dirty, and that is has not been properly represented as such. Concerns about pollution in Alberta, Canada and North America as a whole has run most of the opposition against the pipeline, and if there was opposition coming from Mid East production it has likely more to do with issues concerning Iran than Canadian oil. In the end, oil and gas are usually never just corporate interests as they involve issues of national security. Chinese firms that have made bids on US oil firms have been blocked from purchases due to national security issues. Obama is not linked to the oil industry like Bush was and it is difficult to see how he might be influenced with his tough stance on Pakistan and sanctions on Iran that meet US foriegn policy concerns at the risk of upping oil prices. In the end, Canada can sell its oil to anyone they wish, and they will do that if the market is open.

  • Kathleen Millar

    Thannks for such an intelligent and gracious response. One question: Obama’s ‘tough stance’ on Pakistan? All best…..


Richard Basas
Richard Basas

Richard Basas, a Canadian Masters Level Law student educated in Spain, England, and Canada (U of London MA 2003 LL.M., 2007), has worked researching for CSIS and as a Reporter for the Latin America Advisor. He went on to study his MA in Latin American Political Economy in London with the University of London and LSE. Subsequently, Rich followed his career into Law focusing mostly on International Commerce and EU-Americas issues. He has worked for many commercial and legal organisations as well as within the Refugee Protection Community in Toronto, Canada, representing detained non-status indivduals residing in Canada. Rich will go on to study his PhD in International Law.

Areas of Focus:
Law; Economics and Commerce; Americas; Europe; Refugees; Immigration