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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Chinese Energy Firms Invade U.S. Neighbors Mexico and Canada

In 1946, with the U.S.-USSR-British military alliance that had defeated Germany and Japan in World War Two unraveling, U.S. diplomat George F. Kennan cabled a dispatch to Washington advocating a policy of “containment” of the USSR that was to become the bedrock of U.S. foreign policy during the Cold War until the Soviet Union collapsed in 1991.

In the last two decades, despite the implosion of the USSR and its subsequent dissolution, the U.S. and its European allies have advanced NATO up to the Russian Federation’s western frontiers, incorporating former eastern and Central European satellite states Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia into the alliance, along with former communist states Albania, Croatia and Slovenia.

Oh, and for good measure, former Soviet republics Estonia, Latvia, and Lithuania.

Perhaps not surprisingly, Moscow had complained that it feels that “containment” is alive and well in Washington as policy.

But America’s push for “containment” of possible enemies has for the past decade been extended to China, or so it seems in Beijing, which has watched with alarm both the Pentagon’s penetration of the former Soviet Central Asian republics, along with Washington’s policy, announced last year, to shift fully 60 percent of its military forces to the western Pacific.

But China’s apparent if unstated strategy to deal with this threat is very different from the USSR, which sought to match Washington bomber for bomber, missile for missile, submarine for submarine, effectively running the country’s economy into the ground.

Related article: Enbridge Continues Rise as Canada Seeks Own Energy Road

No, China has proved a much more cunning enemy, drawing on its vast history and its premier military strategist, Sun Tzu, who wrote in his seminal work, “The Art of War” more than two millennia ago, “The supreme art of war is to subdue the enemy without fighting.”

China’s secret weapon?

Its economy.

In 2012 China surpassed the U.S. to become the world’s biggest trading nation, as measured by the two nations’ exports and imports, with the U.S. Commerce Department reporting that U.S. exports and imports of goods totaled $3.82 trillion, while China’s customs administration reported that the nation’s import-export trade in 2012 amounted to $3.87 trillion.

Those strategic analysts in Washington looking “beyond the box” might note that China is using its immense economic clout to invade two Western Hemisphere nations adjacent to the United States, Canada and Mexico, even as Washington for the past decade has bled out its treasure and military in its global war on terror. According to Brown University’s Watson Institute for International Studies study, the final cost of the Afghan, Iraqi and Pakistani deployments will reach at least $3.7 trillion, and could go as high as $4.4 trillion, while borrowing the money needed to fight the wars will cost an estimated additional $1 trillion through 2020.

While China’s interest in Canadian energy assets has been relatively well documented, at least in the Canadian press, Beijing is also courting Mexico, and receiving a warm welcome.

Related article: India Mimics China in Seeking African Energy

Two years ago, the U.S. government’s Energy Information Administration reported that the United States total crude oil imports averaged 9,033 thousand barrels per day (tbpd), with the top five exporting countries being Canada (2,666 tbpd), Mexico (1,319 tbpd), Saudi Arabia (1,107 tbpd), Venezuela (930 tbpd) and Nigeria (918 tbpd.)

On 3 April in a written interview with China’s state news agency Xinhua, Mexican President Enrique Peña Nieto said that Mexico views China as "a strategic partner," pledging to upgrade bilateral ties to achieve win-win cooperation. Aside from the diplomatic gland-handing, Peña Neito’s comments come during his first state visit to China to attend the 2013 Boao Forum for Asia. With a fine sense of irony Peña Nieto noted, "Mexico can be a gateway for China to enter North America, the world's richest market. It can so be a point of access to several countries in Central America and the Caribbean."

Are Washington’s mandarins paying attention yet?

Arriving in Sanyu, President Peña Nieto after meeting with Chinese President Xi Jinping described China as "a balancing factor" of the global economy. Wasting no time, the pair subsequently referred during a press conference to the memorandum of understanding reached between the Chinese government and Mexico’s state oil company Pemex, to substantially increase oil exports to that nation.

China has discovered a simple diplomatic truth that still seems lost on the U.S. administration, that most countries prefer peaceful trading ties to military expansion, a lesson that is now lapping at Washington’s borders.

By. John C.K. Daly of Oilprice.com




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Leave a comment
  • juninho on April 11 2013 said:
    Big whoop- is Mexico going to suddenly change its constitution which states that all mineral wealth belongs to the State? I doubt it, and I doubt they'll make an exception for Chinese companies either.

    But hey, all oil is fungible and if the Chinese decide to invest billions in the GoM deepwater, all the better because the only place it can be refined profitably is the US Gulf Coast. Shipping it through the Panama canal to Chinese refineries would eat into margins considerably...

    Same with a pipeline to the pacific from the Alberta tar sands. If the Chinese finance that, some of that dilbit will end up at west coast refineries. Swap agreements are used all the time in the oil industry and the Chinese will do it to...

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