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 # 581  

September 2009


U.S. Falling Behind China, Russia in Scramble for Strategic Natural Resources


by Bonner Cohen

 

By rushing to replace fossil fuels with renewable energy sources, which are unaffordable and unavailable on a commercial scale, the Obama administration is playing Russian roulette with America’s future.  

At stake is a shift in the global balance of power away from the United States toward China and Russia in the critical area of strategic natural resources. 

Earlier this year, the cash-rich Chinese embarked on a veritable shopping spree, snatching up energy and mineral resources around the world at bargain-basement prices.  In February alone, Beijing cut oil deals worth $41 billion with Russia, Brazil and Venezuela.  Among the most lucrative is an agreement with Moscow, in which China will lend $25 billion to Russian oil giant Rosneft and oil pipeline company Transneft.  In return, China will receive 300,000 barrels of crude oil a day for the next 20 years at about $20 a barrel, or less than one-third the current price of $65.  Beijing’s growing appetite for energy has also taken it to the Middle East, where in March a Chinese consortium signed a $3.2 billion deal with Iran to develop an area beneath the Persian Gulf believed to hold 8 percent of the world’s known natural gas reserves.1

In addition to energy, precious metals, with both commercial and military applications, are uppermost on the minds of forward-looking Chinese.  Earlier this year, China’s state-owned metals giant Chinalco signed a $19.5 billion deal with Australia’s Rio Tinto that will eventually double Beijing’s stake in the world’s second-largest mining company.2   What’s more, data compiled by the Nevada Bureau of Mines and Geology show that China is boosting production of its ample domestic mineral resources.  Of 22 key metals commodities in 2008, China was a significant global producer (meaning it accounted for more than 10 percent) in 16 and was the global leader in the production of 10, including zinc, tungsten, gypsum, cement, iron ore, gold, phosphate rock, tin, barite and rare earths.3

Russia, too, is taking care of business when it comes to securing strategic natural resources.  Faced with dwindling supplies of its traditional sources of natural gas, the Kremlin is moving aggressively to exploit vast gas fields in the Yamal Peninsula in northwestern Siberia.  Moscow also has laid claims to an area on the Arctic continental shelf equal to the size of France, Germany, and Italy combined.  Geologists believe the Arctic seabed contains nearly 25 percent of the world’s hydrocarbon deposits.  Furthermore, together with Iran and Qatar, Russia has recently formed what the Heritage Foundation’s Ariel Cohen calls a “gas OPEC,” a cartel that will meet quarterly to coordinate and exercise control over nearly two-thirds of the world’s natural gas reserves and a quarter of  global gas production.4

By contrast, the U.S. is engaging in unilateral economic disarmament by shutting off access to the nation’s most abundant and reliable sources of energy.  Congress and the Obama administration refuse to lift moratoria on drilling for oil and natural gas on the outer continental shelf, or to open up a tiny speck of the Arctic National Wildlife Reserve for oil and gas exploration.5 Also, Interior Secretary Salazar has put on hold plans to develop huge oil shale reserves in Utah, Colorado, and Wyoming.  In April 2009, the U.S. Geological Survey estimated that Colorado’s Piceance Basin alone contains 1.53 trillion barrels of oil.6

In the name of combating “global warming,” Washington is force-feeding Americans a low-energy diet of renewable fuels, including notoriously unreliable and inefficient wind and solar power.  In doing so, it will create a severe energy shortage to the detriment of our prosperity and national security.

Bonner R. Cohen, Ph. D., is a senior fellow at the National Center for Public Policy Research in Washington, DC.



Footnotes:

1 Ariana Eunjung Cha, “China Gains Key Assets in Spate of Purchases,” Washington Post, March 17, 2009, p. A1.

2 Chris O’Brien, “China Stocks Up on Bargain Oil,” Washington Times, March 12, 2009, p. A1; John Lyons, “Brazil Turns to China to Help Finance Oil Projects,” Washington Post, May 18, 2009, A6.

3 http://www.nbmg.unr.edu/dox/changed/9B22.pdf.

4 Ariel Cohen, “Russia: The Flawed Energy Superpower,” in “Russia and Eurasia: A Realistic Policy Agenda for the Obama Administration” (Washington: Heritage Foundation, Heritage Special Report, SR-49, March 27, 2009), pp. 48-50.

5 Brian Baskin, “Salazar Gets Earful on Drilling,” Wall Street Journal, April 7, 2009, p. A3.

6 http://www.eenews.net/Landletter/print/2009/04/09/9.

 


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