Asia's Rising Energy and Resource Nationalism: Implications for the United States, China, and the Asia-Pacific Region

Introduction: Asia’s Rising Energy and Resource Nationalism

1 the national bureau of asian research nbr special report #31 | september 2011 Introduction: Asia’s Rising Energy and Resource Nationalism Mikkal E. Herberg MIKKAL E. HERBERG is a Senior Lecturer in the Graduate School of International Relations and Pacific Studies at the University of California–San Diego, and Research Director on Asian energy security at the National Bureau of Asian Research. He can be reached at . 3 INTRODUCTION u HERBERG O ver the past decade, Asia has become the center of global energy and commodity markets as demand for these resources has mirrored the region’s rapid economic growth. This trend is most pronounced in the case of energy, in which rapid industrialization, massive urbanization, rising per capita incomes, and the expansion of transportation and motorization have all boosted demand for oil, natural gas, coal, and electricity. This boom in energy has been centered in China, but regional demand for other commodities, including rare earth elements (REE), has also risen sharply. At the same time, a relatively limited resource base means that Asia’s import dependence on critical energy and industrial inputs is growing rapidly. Given the uneven distribution of these resources globally, an increasingly rising share of Asia’s petroleum will need to be imported from the Persian Gulf and Africa, both historically unstable regions of the world. Not surprisingly, therefore, a powerful sense of insecurity about the reliability of future energy supplies has spread across the region, including fears that shortages or disruptions could undermine continued economic growth and job creation and thus threaten the bedrock of political stability in Asia. Similar anxieties are emerging in markets for other key raw materials. For example, recent declines in Chinese exports of REEs have provoked regional anxieties over potential shortages of supplies essential to manufacturing high-tech clean energy products while heightening national security concerns over the availability of REEs necessary for critical military applications. Consequently, energy security and access to key raw materials have become a matter of the “high politics” of national security rather than merely the “low politics” of domestic energy and economic policy. Energy and national resource security are now critical strategic and economic agenda items for all the major Asia-Pacific powers. Today’s anxieties have been aggravated by a substantial rise in energy and industrial commodity prices that culminated in 2008 and by what many have called a “super-cycle” of long-term secular commodity price increases. In the wake of the Western recession, rising prices and supply insecurity have re-emerged as major economic concerns, as the global recovery—led by Asia and, in particular, China—drives a resumption of the supercycle . As major regional powers seek to ensure access to key commodity supplies, energy and resource nationalism and a zero-sum atmosphere surrounding the control of future oil, energy, and commodity supplies have become sources of regional rivalry, tensions, and potential conflict. Competition and national suspicion over control of energy and other resources are spilling over and affecting the tenor of the region’s most important strategic rivalries—most importantly, the rivalry between the United States and China. Although there have been some efforts to improve regional and multilateral cooperation in order to maintain open markets and access to supplies, for the most part cooperation has been in relatively short supply. The United States has been the traditional hub and guarantor of stability in Asia and the key energy-exporting regions of the world. Political stability and economic prosperity in Asia are vital to long-term U.S. interests in the region. Therefore, the United States has a major stake in how Asia responds to energy and resource insecurities. Competition over access to and control of energy supplies, transportation routes, and critical materials such as REEs has the potential to stoke political tensions, aggravate existing strategic rivalries, and even provoke outright confrontations. Given that Asia lacks an overall regional security architecture and that the existing institutions for managing conflict are limited, such competition could prove to be deeply destabilizing. Thus, 4 NBR SPECIAL REPORT u SEPTEMBER 2011 reducing the potential for conflicts driven by energy competition and resource insecurity has become an important new dimension of the United States' regional strategy. To address these issues, the National Bureau of Asian Research (NBR) and the Woodrow Wilson International Center for Scholars co-hosted NBR’s seventh annual Energy Security Conference in Washington, D.C., on May 4, 2011. Building on...