Calling for a Multilateral Approach

East Asia and Challenge of Energy Security

By Behzad Shahandeh

East Asia’s reliance on Persian Gulf oil will deepen despite its efforts to diversify its energy sources and stockpiling. The region currently imports some 70 percent of its oil from the Persian Gulf, and at the same time accounts for half of the latter’s crude exports. With 65 percent of global proven oil reserves located in the Persian Gulf, the region will play an ever important role vis-à-vis energy-hungry East Asia.

China, the number two world consumer of oil after the United States now imports 65 percent of its oil needs, of which more than half come from the Persian Gulf (Iran and Saudi Arabia now represent almost two-third of China’s Persian Gulf oil imports).

Japan, which has recently been overtaken by China (the awakening dragon) and currently the third biggest consumer of oil, imports nearly 100 percent of its oil needs, of which some 90 percent come from the Persian Gulf. Then there is South Korea as the fourth, importing 80 percent of its oil needs from the same region.

It is contended that East Asia’s dependence on oil may exceed 90 percent in 2010 with the Persian Gulf supplying the bulk (by that year total oil consumption in the region could reach 25 to 30 million b/d of which 18-24 million b/d will have to be imported). While oilfields in Russian Siberia and Central Asia do offer some short-term energy relief, the lack of existing infrastructure to facilitate the transport of this oil poses costly political and economic challenges of their own.

Closely connected to the above is the possible danger of tension stemming from such an oil shortage within the East Asian region itself. The ever-growing demand for energy (fossil fuel as the source of energy has no viable alternative since solar energy is very expensive and the nuclear one dangerous) may strain relations between such important regional actors as China and Japan, for example, which may engender a set of new destabilizing regional or international conflicts.

But an even more immediate problem is the effect of oil-market volatility on the region, with a sharp rise in oil prices putting particular pressure on the currencies of some crude importing emerging- market countries. Several key economies in the region are at the most risk from persistent high crude prices, with the major net importing countries like China, South Korea, as well as Taiwan, being the most vulnerable. The danger for these economies lies in the impact on the current accounts and growth, and domestic purchasing power.

Regional energy security in East Asia is thus called for, and one needing a multilateral approach. It remains a complex multifaceted challenge requiring coordinated action by its three major countries: China, Japan, and South Korea. Analysts contend that measures are needed to reduce dependence on fossil fuel or to secure an alternative supply to meet rising demand. But it is easier said than done since all alternative energy sources have their problems and are poor competitors to oil.

We also hear that East Asia must address the environmental impact of the region’s energy structure, as seen by the environmental repercussions from the heavy use of coal in Chinese industries, for example. But the proposal has its problems since any reduction in coal use would require importing more oil, which challenges the first contention.

Thirdly, a challenge is raised in ensuring nuclear security in the face of regional ambitions to expand nuclear power. The status has come under severe strain by North Korea’s recent atomic test, ushering calls by some circles in both Japan and South Korea to revise their nuclear policies.

And the issue of improving the vulnerable regional infrastructure and transportation networks, as well as safeguarding vital sea-lanes and chokepoints is raised. But again facts on the ground testify to the opposite with China spending huge amounts of money to patrol the troubled waters and raising worries among other East Asian countries about securing their lifelines.

The positive result of all this is that East Asian countries have become aware of the threats and are conscious about the need to tackle them, but the question is how. Knowing the problem and feeling the need is half the solution and is in itself a step forward. But for East Asia to embark on a coordinated effort, much more than knowing the problem is required.

Behzad Shahandeh is a professor at the Graduate School of International Area Studies at Hankuk University of Foreign Studies in Seoul.