|
China: Separatist Crackdown Could
Taint Foreign Companies
29 May 2002
Summary
International criticism of China's
crackdown on alleged ethnic Uighur separatists has not
waned despite Beijing's insistence that its effort is
vital to the success of the international
anti-terrorism campaign. Beijing is willing to risk
the criticism to attract foreign investment to its oil
and gas sector, but companies such as Royal Dutch/Shell
face the danger of being painted with the same
anti-human-rights brush.
Analysis
At an international press conference May
27, Chinese regional officials once again explained
the necessity of cracking down on alleged ethnic
Uighur separatists in the northwestern Xinjiang
Autonomous Region. Wang Lequan, secretary of the
Communist Party Committee of Xinjiang, said only a "harsh
crackdown" on separatist forces can ensure peace among
different ethnic groups and promote continuous
economic development. Wang added that China's campaign
in Xinjiang was part of the global campaign against
terrorism, and therefore also vital for the stability
of China's neighbors and the world.
Despite Beijing's repeated attempts to
tie its Uighur crackdown to the U.S.-led war against
terrorism, China continues to face criticism for what
some human rights and international groups consider an
ethnic war in western China. Yet for Chinese officials,
peace and stability in Xinjiang are vital for further
development of oil and natural gas resources, which in
turn will spur economic growth in that region.
This chicken-and-egg scenario of
stability and economic growth has prompted Beijing to
weather the international human rights criticism in
the interest of ensuring the security of foreign
investors. But Chinese officials must walk a narrow
line to keep foreign companies from facing the same
condemnation.
Xinjiang is one of the top oil- and
gas-producing regions in China, and its development is
a key part of Beijing's strategy for national unity
and greater energy independence. Xinjiang is the
largest crude oil production base in western China,
and it stands fourth overall in the country after the
eastern provinces of Heilongjiang, Shandong and
Liaoning, according to China's Xinhua news agency.
Also, Xinjiang currently boasts 526.7 billion cubic
meters of proven natural gas reserves, of which at
least 372.5 billion cubic meters are recoverable. Over
the coming years, Chinese officials expect the proven
reserves to rise to over one trillion cubic meters
with additional exploration.
Although this represents a large
storehouse of vital domestically produced natural gas
and oil, Xinjiang is far from any industrial or
population centers in China. To get the gas to the
markets in the eastern coastal provinces, Beijing
intends to build a gas pipeline from Xinjiang to
Shanghai, nearly 2,500 miles away. This so-called
West-East gas pipeline will be the second-largest
infrastructure investment in China, after the massive
Three Gorges dam project. It is expected to cost
between $18 billion and $20 billion, a massive bill
the government has been unable to foot alone.
PetroChina, China's largest crude oil
and gas producer, in February signed an intermediate
accord with a consortium led by Royal Dutch/Shell to
build and operate the West-East pipeline. The Shell
consortium, which will hold a 45 percent stake,
comprises Shell International Gas, Gazprom,
Stroytransgaz and Hong Kong China Gas Co., and it
remains open to the inclusion of ExxonMobil. Of the
total cost, $5.5 billion is earmarked for construction
of the pipeline, $3.1 billion for gas extraction and
$8.4 billion to $9.6 billion for construction of a gas
distribution network.
Construction on the first section,
running from Jingbian, in Shaanxi province, to
Shanghai is scheduled for completion in 2004, with the
second section from Lunnan, Xinjiang, to Jingbian
expected to be operational by early 2005. By 2010,
when it reaches full operational status, the pipeline
will carry as much as 20 billion cubic meters of
natural gas a year.
For Beijing, the pipeline not only will
reduce the country's dependence on foreign oil and gas
but also will serve as a way to vitalize western
China, thus reducing tensions between the prosperous
east coast and the languishing central and western
provinces. Regional economic disparities have long
been a source of instability in the country, and
Beijing is banking on the pipeline's construction and
several other large infrastructure programs in the
west to spur international investment in China's
interior.
But the threat of terrorism and social
instability also weakens China's ability to attract
foreign businesses to its Wild West-style regions.
After a series of bombings and attacks by suspected
Uighur separatists in Xinjiang and elsewhere in the
mid-1990s, the government intensified its crackdown on
the Uighurs. Although largely successful in quelling
overt acts of subversion, Beijing has a new fear: that
Uighur militants who were training in Afghanistan will
now begin trickling back into China after the collapse
of the Taliban regime.
With construction on the vital West-East
gas pipeline just beginning and energy investment into
Xinjiang on the rise, the last thing Beijing wants to
see is a resurgence of the separatist-linked violence
that hit the region from 1996 to 1998. Ironically, the
same event that may force Uighur militants abroad to
return to Xinjiang -- the U.S. war against terrorism
-- at first appeared to offer the perfect opportunity
for Beijing to intensify its crackdown in the region
without endangering its international image.
But this calculation has proved
inaccurate, as the United States has not recognized
the Uighur separatist movement as having any links to
international terrorism or al Qaeda. Beijing cannot
even get Washington to hand over 300 alleged Uighur
militants captured by U.S. forces in Afghanistan.
Despite the U.S. position, Beijing feels
that it must continue to suppress separatist elements
or any other potential challenge to the regime in
Xinjiang. The West-East gas pipeline is vital for
greater energy independence and for Beijing's ability
to hold together the disparate regions of China.
But in ensuring the security of foreign
investments, the government risks opening a new can of
worms: Foreign investors like Shell could be targeted
by the same groups criticizing China's human rights
record. With the pipeline itself expected to yield
minimal returns on the investment -- and that is over
a long period of time -- such foreign oil and gas
companies could find the potential costs of remaining
in the project outweigh the benefits.
Copyright © 2002 Strategic Forecasting
LLC. All rights reserved.
|
