Liu: Will Iraq Strife Hurt U.S.-China Ties?

With violence and chaos in Iraq growing ever more intense, many Americans have asked me this week about China and the Iraq conflict. Although I'm based in Beijing, I was in Baghdad for the fall of Saddam Hussein, witnessed Washington's "shock and awe" bombing from the receiving end and have reported from inside Iraq yearly since Saddam's fall. Right now, I'm on a national speaking tour in the United States, and the questions are coming from those who've seen at my speech venues the giant posters of the China and Iraq cover stories upon which I've worked.

At first blush you might think there's little in common between Beijing and Baghdad—except perhaps the proliferation of Chinese restaurants in the Iraqi capital since Saddam's fall. (At least two in the Green Zone, and another in the red zone where bombings and gunfire eventually made it impossible for customers to enjoy a sit-down meal—but Chinese takeout survived nonetheless).

In fact the Iraq conflict—and whether the bloodshed might intensify into a Sunni-Shiite civil war—has serious implications for Chinese strategic planners. It's not just about China and Iraq and their bilateral relations. It's also about China and America. It's about China and energy; about China and Islam, about China and empire—about the rise and fall of great powers in general.

Things have changed dramatically for China since what we know as the first Persian Gulf War—the 1991 coalition effort to liberate Kuwait from Iraqi occupiers. Back then Beijing was still a net exporter of oil. Beijing abstained when it came time for the United Nations Security Council to vote, rather than use its veto that would've denied international legitimacy to the U.S.-led  military effort to liberate Kuwait. Chinese officials were keen to claw their way back into the good graces of the international community after the 1989 Tiananmen Square crackdown. It also wanted to stay in step with majority opinion in the Mideast and Persian Gulf, where countries such as Egypt, Iran, Saudi Arabia and others were taking on increased importance to Beijing.

Mostly, the 1991 war against Saddam was a wake-up call for officers of the People's Liberation Army. At the time it was they who really were shocked and awed by the display of smart bombs and smart warfare, which led to the swift collapse and retreat of Saddam's troops in Kuwait.

Since that time, Beijing's thirst for energy resources has mushroomed. In 1993 China became a net importer of oil. Two years ago, China supplanted Japan to become the world's number two biggest energy consumer, second only to the United States. China accounted for 40 percent of the growth in global oil demand since 2000, thanks largely to phenomenal growth in its GDP, which hit 9.8 percent in 2005, year on year. Now oil imports count for one-third of Chinese crude oil consumption.

Two years ago energy shortages began triggering power brownouts in southern China, hoarding of gasoline products and the purchase of huge generators by factories that had to produce their own electricity to keep manufacturing ticking over. There are more and more gas-guzzlers on the road in China;  its 1.3 billion people now own 20 million vehicles, a figure that could grow seven times in the next 15 years.

Energy security is now an urgent imperative in Chinese foreign policy. And Iraq is sitting on top of proven oil reserves believed to be the third largest in the world. In 1997 the China National Petroleum Corporation (CNPC) had signed a $1.2 billion contract with Saddam's regime to develop Iraq's Ahdab oilfield. Beijing committed $660 million to the effort. But work never got off the ground, due to international economic sanctions against Saddam, and the project was frozen. (Saddam's regime had also contracted to purchase a fiber-optic system for Baghdad from the Chinese tech firm Huawei, which has close ties to the military. )

There's another reason for Beijing to worry about what's happening in Iraq: Iran. China's relationship with Baghdad was never as close as its ties to Tehran. Beijing was heavily committed to Iran in the 1980's, not just in the energy field but also in the transfer of military hardware, nuclear and missile cooperation and a growing geopolitical relationship.

What's the connection between Iraq and Iran, aside from the eight-year war they fought against each other?  The answer is unfolding now in the sectarian violence in Iraq. Saddam ensured the Sunni dominance of politics and the military in Iraq, despite the fact that some 60 percent of Iraqis are Shiite, as are most Iranians. Aided by the introduction of direct elections in Iraq, the post-Saddam explosion of Shiite political aspirations and religious practices is redrawing the regional map. Through its influence on the Shiite majority, Tehran is now poised to wield enormous political and religious clout in the Middle East.  And China is one of Iran's key allies.

Against the backdrop of Beijing's phenomenal appetite for energy, Chinese officials have been counting on Tehran as a crucial energy supplier as well. Iran accounts for about 13 percent of China's total oil imports. Two years ago a Chinese oil firm agreed to a $70 billion deal that would give it 51 percent of Iran's Yadavaran oilfield, one of the biggest in the country.  Beijing also has a multi-billion-dollar liquefied natural gas contract with Iran. Little wonder China doesn't want the international community to call for economic sanctions against Iran, in a bid to pressure Teheran to give up its nuclear programs.

China is also involved with key Arab nations that watch the paroxysms in nearby Iraq with fear and loathing. Sixteen years ago, Beijing didn't even have normal diplomatic relations with Riyadh. But last month the king of Saudi Arabia visited China, marking the first time a Saudi head of state has set foot there since their 1990 normalization of ties. Now Saudi Arabia is China's top supplier of crude oil, with exports soaring more than 30 percent last year. Riyadh is also Beijing's top Mideast trading partner, and is helping build an oil storage facility in China's Hainan island capable of holding up to 100 million tons of oil. As part of Beijing's new proactive diplomacy, mainland corporations have been urged to "Go Global"—and Arab nations are among the key targets of this campaign. Today's news of the thwarted bombing of a Saudi oil refinery sent chills through the corridors of power, not just in Washington, but in Beijing as well.

The story of China and Iraq is really a story about China and America. The post-9/11 wars in Afghanistan and Iraq helped China dodge a bullet, deflecting attention away from the perception, among some Americans, of Beijing as a post-Cold War threat to U.S. interests. The more U.S. energy and resources are bogged down on Iraq, the more China may feel it can pursue its "peaceful rise" strategy in an environment of U.S. neglect.

Just because Chinese authorities keep a low profile on the Iraq war, that doesn't mean they don't care. When I meet with Beijing officials in China, and they discover that I've spent many months reporting in Baghdad, they almost always grill me on the implications of the Iraq war for the United States.

Mainly they ask whether U.S. worries about the "China threat" are returning in Washington, D.C.  Unspoken (because Chinese officials are usually  too polite to ask such pointed queries) are some other key questions, such as whether U.S. travails in Iraq have worked to China's advantage, allowing Beijing's "peaceful rise" at American expense? Can China's ascendancy in the world be, as Beijing diplomats like to put it, a win-win situation for everyone? Or is the rise and fall of great powers inevitably a zero sum game?

In the game of politics in Washington, meanwhile, mid-term elections are looming—and that often means an increase in warnings about the "China threat" from Capitol Hill, where more than 20 anti-China bills are sitting in the congressional hopper. Trade frictions in particular are running strong. Some Beijing officials worry that Iraq has become such a mess that their American critics may turn to heightened China-bashing because, with Sino-U.S. ties, it's usually easier to point fingers than to take blame. One of the most immediate implications of the long-running Iraq conflict today is that the violence is taking up huge amounts of time and attention from U.S. administration officials and planners. Of all the issues tangled up in Iraq—energy, Islam, Iran, empire—one of Beijing's biggest concerns is whether the situation will allow Sino-U.S. relations to remain on an even keel.