China's neighbours get cold shoulder on energy

Joe Cash, Reuters

As energy stress spreads across Southeast Asia, governments across the region are asking China to deliver on its pledges of closer energy security cooperation by freeing up now-banned exports of fertiliser and fuel. But so far China has offered only vague statements and has yet to even publicly acknowledge the exportbans reported by Reuters and others as it focuses on insulating its own economy from the ⁠war in Iran. Analysts don't expect that to change, pointing to the tension between China's stated ambition to be a bigger player in regional affairs and the realpolitik of its commitment to keep its own economy outpacing global growth. China is the world's second largest fertiliser exporter and also a large supplier of fuel. For many countries in Asia including Bangladesh, the Philippines and even Australia, Chinese imports are a major source of supply, now cut off by its export bans.

Dhaka earlier this month asked China to honour existing fuel contracts, while Thai diplomats will engage Chinese counterparts to keep fertiliser shipments from China flowing if needed, officials in Bangkok said. In Malaysia, officials said last week the Chinese export ban would worsen fertiliser rationing, including in its ⁠oil palm industry, the world's second-largest, and add a further blow on top of the war in Iran.

Even the Philippines has sought assistance despite the two countries' disputes over the South China Sea. On March 17, the Philippines minister of agriculture visited China's embassy in Manila and said China had agreed to continue fertiliser shipments. Beijing's one-sentence readout said only that they had discussed agriculture. The same day Australia, which imported a third of its jet fuel from China last year, said it was discussing jet fuel exports with Beijing.

"China may offer some ceremonial assistance, but it's highly unlikely, if not wholly improbable, that it will share any substantive amount of its food, energy, or other reserves with other countries," said Eric Olander, co-founder of the China-Global South Project.

In fact, analysts said Chinese policymakers were likely quietly congratulating themselves on the strategic foresight to begin stockpiling since the early 2000s, a policy that may have seemed excessive in peacetime but now looks decidedly practical. People's Daily, the Communist Party's flagship newspaper, trumpeted China's relative energy security in an editorial earlier this month and said the country's foresight meant China held the "energy lifeline" in its own hands.

China's Ministry of Foreign Affairs did not immediately respond to questions from Reuters.

China's ⁠flagship Belt and Road infrastructure initiative has seen world leaders regularly congregate in Beijing to discuss “win-win” cooperation but with the region now short on fuel and fertiliser, Southeast Asian capitals are instead looking for replacements from the likes of Russia. "China won't want to create expectations it can't sustain. Beijing has no desire to be a regional energy backstop for an indefinite period of disruption," according to Ruby Osman, a senior policy adviser at the Tony Blair Institute for Global Change.

Beijing will likely stick to its tried-and-tested playbook: imposing sharp, broad curbs on energy and energy-related exports before selectively resuming trade once officials are confident domestic demand can be met, she said. Famine and scarcity remain deeply embedded in China's political consciousness, with the trauma of Mao Zedong's Great Leap Forward and Cultural Revolution still close enough to remember.

"Only if China gets more comfortable with its own exposure, then I would expect meaningful support," said Max Zenglein, senior economist at the Conference Board Asia. "I expect any support will be very transactional. Not a good position to be in if you are one those countries, unfortunately."

Wang Jin, a ⁠senior fellow at the Beijing Club for International Dialogue, a think tank under China's foreign ministry, said Beijing could also benefit if the shock pushes trading partners to accelerate investment in green and nuclear energy, sectors where China leads after years of state-backed investment.

What is more, with no major aid donor such as Japan, or regional rival, stepping in to plug shortages, China faces little pressure to do so itself, analysts said.

Olander compared the situation ⁠to the COVID-19 pandemic, when officials across the region looked to India as Asia's main source of vaccines, only for New Delhi to halt exports as infections surged at home. Osman said China's partners seeking concessions would do well to remind Beijing of its own commitments. "Maybe the key is just to quote this new bit of the five-year plan back to Beijing: 'strengthen international cooperation in food, energy, data, biological and sea passage security, counter-terrorism and other fields.'"