Cover Page

Earth Wars

THE BATTLE FOR GLOBAL RESOURCES

Geoff Hiscock

Wiley Logo

John Wiley & Sons Singapore Pte. Ltd.

Maps

Africa

image

Asia

image

Southeast Asia

image

Australia

image

Middle East

image

Europe

image

North America

image

South America

image

Introduction

What we are experiencing with the transformation of China is a once in a century or more event. It really is the start of a global rebalancinga rebalancing that will continue to unfold over many decades.

—BHP Billiton Chairman Jac Nasser, 9 May 2011

Six hundred years ago, China neither needed nor wanted anything from the West. It was the Middle Kingdom, the centre of the world, the seat of all that a civilization could possibly need to advance and prosper. India viewed itself through a similar prism—one rich in culture, religion, and resources. There was trading, of course: seafarers from the Mediterranean, the Persian Gulf, the east coast of Africa, and the islands of Southeast Asia bought and sold all manner of spices, timber, textiles, gems, and opium along a route that stretched from Venice to Calicut in India and on to Guangzhou in China.

Then came the great age of European exploration, as fleets from Portugal, Spain, Holland, and England sailed out into the oceans in search of new worlds to conquer. By the twentieth century, China and India were supplicants to the dominant colonialists of Europe, America, and Japan, seemingly beaten by their technology and their industrial might. After decades spent throwing off the colonial yoke and then trying to catch up economically, the two Asian giants are now poised to become the drivers of global growth in the first half of the twenty-first century. Demography is helping shape their destiny: A massive population base of 2.5 billion people, all eager to savour the full fruits of modern living, means there is increasing competition for scarce resources.

Whether it is lithium from a salt pan in the Andes, gas from the Caspian Sea, oil from a deepwater well off the coast of Brazil, coal from Africa’s Zambezi River region, iron ore from the Australian outback, potash from Canada, or uranium from a Kazakhstan mine, China and India are keen to ensure the security of their future resources supply. Renewable energy from multiple sources and technologies can help, which is why the Asian duo are among the world’s leading developers and users of solar, wind, and hydro power. Along with their urgent quest for control of natural resource projects around the globe, China and India know they must better nurture what they have at home. Each has substantial energy, food, and water supply capabilities, but pollution, contamination, and overuse are taking their toll of farmlands, river systems, and air quality.

In the race for global resources, tensions inevitably emerge. There are flashpoints everywhere—high food prices, for example, had a role to play in the violent political upheavals of the 2010–2011 Arab Spring. The world needs the sea lanes to stay open for trade, but maritime boundaries are a constant source of friction, and piracy adds an unwelcome element of danger for mariners. The oil and gas reserves of the South China Sea, for example, give an extra edge to China’s territorial disputes with Japan, Vietnam, and other Asian neighbours over island groups such as the Senkaku, the Paracels, and the Spratlys. India has its own territorial issues with China over Aksai Chin on the Tibetan Plateau, and resource-rich Arunachal Pradesh in the eastern Himalayas. In 1953, India’s then-Prime Minister Jawaharlal Nehru declared after a trip to China that the Chinese people cherished in their hearts the greatest of love for India, and wished to “maintain the friendliest of relations” with it. Nine years later, the two countries would be at war. While China–India economic ties have strengthened considerably since then, the edginess continues. At the same time, the United States, Europe, Russia, Japan, South Korea, Brazil, and half a dozen big, emerging economies such as Indonesia, Iran, Turkey, Mexico, Nigeria, and Saudi Arabia have their own interests to promote and protect.

On the political front, there are multiple changes ahead among the biggest economies. In China, Xi Jinping is likely to become chief of the Communist Party in October 2012 and president in 2013, with Li Keqiang his likely running mate as premier. Barack Obama may well be a one-term U.S. president, while India’s Prime Minister Manmohan Singh will remain until 2014 before a possible transition to Rahul Gandhi. Angela Merkel may run again for the German chancellor’s job in 2013, and we have already seen massive changes in other European administrations such as Italy and Greece in 2011. As for Japan, who knows? Since the end of the Koizumi administration in 2006, it has had six prime ministers. There will be a new president in South Korea in 2013, and in Indonesia in 2014. In Turkey, Prime Minister Recep Tayyip Erdogan’s term runs until 2015, as does that of Brazil’s President Dilma Rousseff. In Russia, Vladimir Putin could be ensconced in the leadership until 2024.

Worldwide, energy is the key requirement to keep economies growing and living standards improving. But the era of easy energy is over. The cheap and easily accessible oil of past decades is used up or locked up in strategic reserves. Now the world has an energy choice, but what a choice. The remaining oil is too political, coal’s too dirty, nuclear’s too dangerous, wind’s too fickle, solar’s too expensive, hydro’s too dislocating, geothermal is too hard to wrangle, and fracked gas is too divisive. Even so, many of the world’s top resources companies see gas as the great savior over the next 20 years, in what the International Energy Agency calls the impending “golden age of gas” in its World Energy Outlook. Russia already sends Siberian gas to Germany via a 1,200 km undersea pipeline in a foretaste of how that golden era may play out. Something similar is happening in Central Asia, where gas is being piped to China from Turkmenistan, with Uzbekistan and Kazakhstan soon to follow as suppliers. Elsewhere, we’re in the era of deepwater drilling in pristine Arctic environments, and getting to grips with the logistics of “pre-salt” geology off Brazil’s coast in the South Atlantic. Some energy companies see potential in the tar sands of Canada and Venezuela, though this unconventional oil comes with its own set of environmental challenges. In the United States, technology investors are busy pouring molten salt into the pipes of solar concentrators to store energy overnight, or creating giant offshore wind farms that won’t run out of puff at an inopportune moment. China pumps out solar panels at a rate and cost that has bitten deep into the viability of German producers. In Europe, the focus is on integrated power grids that will make the best use of renewable energy’s potential. And all the time, we worry about the Pacific Ocean’s volcanic ring of fire—or where best to put our next earthquake-proof and tsunami-proof nuclear power stations.

Earth Wars is an attempt to show just how interconnected our world has become in terms of the supply and demand for all sorts of resources, as living standards rise and energy consumption grows in advanced and emerging economies. As such, it is simply a snapshot of the conditions prevailing at the start of 2012, and some thoughts on where we are headed. China dominates the resources conversation, but the many challenges facing it are not to be minimised. Just keeping the country together is a constant battle for the leadership in Beijing, who must be ever mindful of the compact they have with the Chinese masses to deliver economic development in return for a delay in greater individual liberty. In India, democracy bumps up against the social frustrations of caste, color, corruption, religion, ethnicity, and gender every day, but the country’s optimism about the future is undiminished.

Geoff Hiscock

January 2012