China’s oil import scheme is far from crude

An excellent post earlier today by my colleague Travis Daub highlighted China’s ventures into the Iraqi oil market. But the IHT article that Travis linked to seems overly alarmist in predicting that China will rely on illiberal regimes to feed its insatiable demand for energy. The reality is likely to be far more mundane.

If you look at China’s crude imports by region, what you see right now is rather impressive source diversity. Here’s a breakdown using 2005 data:

• Middle East: 47.2%
• Africa: 30.2%
• Europe/Latin America/Other: 14.9%
• Asia-Pacific: 7.6%

That picture, of course, will soon change as China’s demand grows. But, at least according to one leading expert with whom I spoke recently, it’s unlikely that obscure, anti-Western, illiberal regimes in the remote corners of the world will have reserves large enough to feed China’s demand. Rather, their primary source is likely to be a very familiar one: the Middle East. In fact, one recent analysis I saw suggested that by 2015, nearly 65% of China’s crude imports will come from the Middle East.

That’s hardly oil adventurism. China and the United States may compete for reserves, but such competition is unlikely to be taking place in the “backwaters of the world.” And the real question prompted by these numbers isn’t whether China is on a crash course with America. Rather, it is how long China’s leadership can continue to pretend that events in other parts of the world have no impact on its own financial and political future?