More and more “less-developed” countries are responding favorably to China’s political and financial offers of investment, conflict resolution, an alternative financial non-dollar system, and all-around benign, benevolent, Big Brotherhood.
The Chinese pitch is that it will help you by investing in your roads, ports, and resource development. China sells this in the name of trade: they will provide a market for the resources and pay you for them and you will use that money to buy manufactured products from China.
Trade generates prosperity and you will develop your country, they say. The resources, of course, are those China needs and the roads and ports are required to take the resources out of the country and ship them to China. The Chinese will send a lot of workers and technicians to direct, help, and train local workers to work efficiently on these projects, in order to keep costs low. Of course, to keep discipline among the Chinese workers and protect the locals from any Chinese miscreants, China will send a few military personnel and police to cooperate with local law enforcement to maintain order in the areas where they invest.
Does this all sound familiar? It should. It used to be known as colonialism - and it still is, regardless of what name is put on it. Colonialism was supposed to have ended in the middle of the last century. Colonialism is, as is a rose, still colonialism by any other name, however. The irony is that many countries responding to China’s blandishments were colonies not so long ago and, after having gained independence with varying degrees of difficulty, and now are embracing the idea of returning to colony status.
These countries, over the years, have been known as “less developed,” “developing,” “emerging economies,” and “Third World.” A few (Australia, Canada, New Zealand, Singapore, the United States) prospered with independence and developed broad-based economies. Argentina did, but succumbed to the empty promises of socialism, particularly in its fascist form, and threw its prosperity away. Brazil and India always seem to be on the verge of widespread prosperity, but never quite seem to make it. Some countries got rich on oil, but struggle to diversify their economies. Most so-called developing countries really do not develop much, regardless of the amount of foreign aid, investment, or well -intentioned guidance they receive. They reach a certain level and stay there. But, they desperately seek prosperity and, after decades of floundering, they know they can’t obtain it by themselves. They know they can only achieve it if someone provides it to them, so they are vulnerable to the latest smiling con man. They are especially so when their current sources of help are obviously running out of patience.
China is forthright about its objectives. It develops strong trade and economic relationships in order to gain political leverage. Do things our way or we cut off trade, which is making you rich. President Xi is a strong Communist who advocates Communism for all. Socialism, in general, Communism particularly, is a philosophy of economic stagnation. It has no record of having ever created a prosperous society. Xi is using trade and investment to make the world dependent on China and will exploit that dependence to impose a global system of Communist subjugation on the world. If China’s internal policies are any indication, that subjugation will be brutal, overpowering, omnipresent, inescapable, and genocidal. Xi is quite open about it. He gives speeches about his plans and objectives. If you want to do business with China, you will do as China says about everything, all the time, including in your own country.
China is still in the early stages of establishing that dominance and displacement of U.S. influence. A large part of its efforts is directed to tying up oil supplies in long-term contracts, several of which were signed in the last few weeks in various countries. China is assuring its oil supplies. I did not find details of those contracts, but one can surmise they are designed to assure supply without the price volatility of the spot market.
With the Ukrainian War and Covid disruptions to supply chains, the world trade system is fragmenting; globalized systems are not reliable. This trend is particularly true for oil and gas supply and market relationships, now that Europe’s dependence on Russia has been revealed to be a big mistake. I expect many countries, especially those in Europe, will likewise be seeking to contract for long-term oil and gas supplies, a major change in oil and gas markets. As more and more of the world oil demand and supply is subject to long-term contracts, those supplies will not be part of the worldwide pool of supplies subject to daily trading on which companies and countries can rely in times of shortage and stress.
China’s current sales pitch is that they do not preach about human rights, sanction people for misbehavior, or interfere in countries’ internal affairs, as the U.S. does. Countries are finding out that loan financing is not aid, however. It must be repaid, but many of China’s loans are for infrastructure which, in poor countries, does not generate revenue to repay loans. Next, they learn that China is not so pleasant when one defaults on its debt.
China’s helpfulness will not be the great uplift these countries expect.
Charles A. Kohlhaas is an experienced oil and gas industry executive and consultant with major and independent companies domestically and internationally. He is also a former professor of petroleum engineering at the Colorado School of Mines.