As the fight between China and Japan and that between China and Vietnam for petroleum is still pending, India, a future big oil consumer, is competing with China for oil supply from the Middle East, especially Iran, which is beyond the control of the U.S.
Once India, a major Asian country, gets into the period of fast growth in investment as China did, the world's oil sector will face the most formidable test in the next stage. As a future big oil consumer, India clearly sees this.
From 1998 to 2003, imports of crude oil from the Middle East account for 50.9 percent in China's total imports. The import volume from Iran took up 13.6 percent, secondly only to that from Saudi Arabia, 16.7 percent. The annual growth rate of imports from Iran stood at 16.5 percent, also ranking the second. Analysts point out that once the memorandum of understanding signed by China and Iran on the Yadavaran Oilfield Development Project is implemented, China is likely to overtake Japan and European countries in the area of international oil and gas development in Iran, becoming one of the largest investors in Iran's oil and gas field.
The present situation and development prospects of oil trade between China and Iran are not only crucial to the rapid development of the Chinese economy in recent years, they will play an irreplaceable role for China as it strives to fulfill the goal of doubling its GNP in the next ten years.
Experts point out that the growth of demand that China has seen over the past two years was completely within economists' expectations; what actually affects the equilibrium between the supply and demand of energy sources in the future is not China's development, but the massive overall economic development of countries like India, which will greatly affect the current oil supply and demand pattern in the world. Meanwhile, as the world's crude oil supply has hit the limit, the explosion of demand in India will pose a threat to China, another major oil consumer in Asia.
In fact, India has started to make preparations long ago, trying to forge cozy relationship with Iran, which, as the world's second largest crude oil producer, defies the control of the U.S. Meanwhile, India is secretly wrestling with China to get oil from Iran.
India's efforts have obviously paid off. Recently, it reached an agreement with Iran to jointly develop the largest gas field in the world. Indian Oil Corp., a state-run company from India, will work with Iranian firm Petropars to exploit Iran's gas field, which holds the largest reserves in the world. Some analysts say New Delhi is even willing to run the risk of hurting Indian-US relations to cooperate with Iran in the field of energy, because it puts the nation's energy security first.
India is now acquiring equity of foreign oil and gas fields worldwide to meet its future and expected energy demands. And it has reached agreements with Sudan, Russia and Syria.
Petroleum analysts point out that the wrestling between China and India mirrors their respective concerns for their future energy security. However, for China, the real threat of energy comes from the U.S.
Andy Xie, chief Asia economist at Morgan Stanley said, "In his second term, Bush is very likely to attack Iran. That will result in soaring oil price, and truly imperil China's economic development."
Prior to this, some Chinese economists also pointed out that if the U.S. launches military attacks on Iran, the "petroleum bottleneck" may send the Chinese economy into a dilemma that it has been trying to avert: it either faces the stagflation of oil price, which may result when oil consumption is retrenched by force, or it has to raise Renminbi's value, impair a number of export industries, and introduction of foreign capital to keep up its oil consumption. In both cases, the biggest harm done to China is the exacerbation of the employment situation in the country.