China doesn’t have an empire, except maybe in one unexpected country and only if you squint hard

 Empire is one of those ill-defined terms. Problem is, define it too narrowly—say, formal sovereignty over a subordinate political community—and you deny the existence of, say, the Soviet empire in Eastern Europe, or the American one in the Caribbean. That’s not a useful definition. Define it too loosely, however, and every power imbalance becomes an example of “empire.” That’s not helpful either.

One useful way to define empire is through the threat of sanctions. If one political community enforces its writ over another by the threat of sanction (active painful sanctions), then you’ve got an empire. Might be strong, might be weak, but it’s imperial. A corollary, of course, is that the stronger political community will extract either political control or economic benefits from the weaker one. (China gets no visible non-commercial benefit from its presence in the Bahamas, for example.)

Chinese energy policy is often accused of being imperialistic, especially in Africa. The evidence comes in three flavors. First, “equity oil”: the tendency of Chinese state-owned companies to buy equity stakes in foreign oilfields and oil producers. Second, the way China ties state-financed loans to oil agreements. If countries want the cheap finance, they need to give China cheap oil. Finally, the long-term nature of such agreements, putatively locking the producing nations into providing China with oil at a discount.

The most famous of these deals, with Russia, turned out to be a lot less when examined it up close. China lent Russia money at market rates to build a pipeline that would deliver hydrocarbons to China at market prices. It’s hard to see the imperialism. Where was the threat? Where was the benefit?

OK, but that’s with the Russian Federation, you say. Russia is a great power, sort of, and not subject to Chinese pressure the way that smaller and poorer places might be. Okay. To test that, we can go over the universe of loans-for-hydrocarbons deals signed by China since the beginning of 2009. How many of them involved the delivery of oil at less than market price? Not Angola, not Brazil, not Bolivia, not Kazakhstan, not Ecuador, not Turkmenistan.

Has China managed to get a price discount anywhere? Yes, once. In February 2009 the People’s Republic inked an agreement with the Bolivarian Republic which provided a $4 billion loan from the China Development Bank in return for 200,000 barrels of oil per day at a $2.00 per barrel off the market price, invoiced monthly. Now, to be fair, a discount in that range is fairly standard. The problem is that Venezuela’s “market price” is completely opaque. Venezuelan crude trades at rather less than WTI or Brent simply because it costs much much more to refine. Only PDVSA is, shall we say, rather opaque at providing information about the prices that it charges. So how to benchmark against the market price, when the market price (while existant) is hard to find?

You would have to go all James Bond to get the answer. Fortunately, the State Department did so in 2009. Venezuelan sources told State that PDVSA supplied China with oil as low as $5 per barrel. That’s a not a discount of $5 per barrel (which would already be above the $1-$3 norm for such agreements); that’s a price of $5 per barrel.

Wow! Now that’s imperialism!

Only ... well ... imperialism is not defined by a smart bunch of Chinese companies taking advantage of the administrative wreck that is Petróleos de Venezuela. Rather, it is defined as the use of sanctions or the threat of sanctions to alter the governing policies of a subordinate political community. I suppose that maybe you could define the possibility that China would withhold its capital as a form of sanction ... except that the only reason Venezuela has trouble raising capital at much better terms elsewhere is the mismanagement of the Hugo Chávez. (For what it’s worth, which isn’t very much, Venezuela now insists, “We don’t cut prices in any of our international agreements.” Except to the Bolivarian Alliance countries. And Spain. But other than that, we should believe Minister Rafael Ramírez. I mean, he said it below portraits of Che and Fidel!)

I suppose you can call it crafty Chinese imperialism, or you can say, “The people now charged with reaching international supply agreements on PDVSA’s behalf couldn’t negotiate their way out of a wet paper bag.”

Ghana, I should add, appears to be doing a much better job. For all the Ghanian deals’ faults, and there are many, Ghana hasn’t even given the Chinese preference for oil contracts in exchange for their money, let alone a price discount.

In short, Chinese hydrocarbon companies are going abroad ... because that’s where the oil is! Other than in cases of truly gross local incompetence they haven’t gotten particularly good deals, despite widespread bribery on their part.

Uranium, of course, is a different story.

Comments

[Will Baird]

...

um. Does the word 'empire' really fit here?

I know I'm being stupid, but...

[Noel Maurer]

It doesn't fit at all. That's the point of the post --- people (well, some people) get all worked up over Chinese equity oil as some sort of imperialistic power exercise, when it's just not.

[Will Baird]

Well, I mean, even what the US does. It's more hegemony than an empire.

[Noel Maurer]

I've never quite gotten the difference between the two, other than a undue weight on the form of legal sovereignty. That seems not useful.

When I have heard a functional difference between an imperial power and a hegemon, it's that hegemons don't interfere in the internal policies of their subordinate states. Thing is, the United States most certainly does, at least with a large subset of those subordinates.

I'm willing to abandon "imperial" as perjorative (you know, like "socialist" in the domestic context) but I'd really have to believe that the sensibility of the offended party is worth preserving. Since I often advocate imperial policies, that isn't something I worry about at the present moment.

I could blame it on my friendship with Niall Ferguson ...

[Randy McDonald]

How many empires, Noel, do you think the United States has?

[King-Walters]

I don't understand the last three comments. Non sequitur, weird argument, non sequitur. Did my reading comprehension fail midway down the page, or is there some context I'm missing?

Not sure I understand the main post, either. “This definition is too narrow. This one is too broad. So I will use a method as a definition, while attacking a strawman.” Maybe my reading comprehension is just generally bad today, or maybe something else is going on.

P.S. Yes, I'm alive. If in a rather bitchy mood.

[King-Walters]

Ah, I understand Will's last comment now.

[Noel Maurer]

Hmm. "Empire defined by running up flags is too narrow." Check. Eliminates the Soviets, and even a good chunk of the Nazis in the West.

"Empire defined by power asymmetry is too broad." Right, check, my older brother did not run an Empire of Ricky and Noel.

So ... "Empire is when one political community uses sanctions (or the threat of sanctions) to enforce public policies in another." Passes the smell test, I think.

Then: "People say China is creating an empire! But, like, it's not."

My response to Will was that the U.S. goes beyond the usual definition of hegemony.

Make sense? I'm very happy to hear you're around!

[Noel Maurer]

The above the capsule version of the (rambling) post's essential argument.

The evidence that China isn't building an empire? One general feature, and one exception that turns out not to be an exception.

The general feature: "With one exception, China has been unable to turn its political influence into better deals than one would have expected from the commercial foundations. Some, in fact, are worse ... China is overpaying for resources."

The exception that turns out not to be: "The BRV has given China crazy-favorable deals ... but neither the threat of sanctions (implicit or explicit) nor Chinese power over powerful Venezuelan individuals are /not/ the reasons. In fact, the great terms of the deal seem to have been a mistake on Caracas's part."

Is that clearer?

[King-Walters]

I basically have three problems with your post and comments. First, I'm not sure the Chinese aren't getting better deals then they would otherwise. Second, the threat of sanctions seems more like a means of establishing an empire (or hegemony) than a way to define same. Third, I think that any definition of empire that includes the contemporary US is useless.

I'm not too sure of my ground for the first problem, and may be talking nonsense. But most of the analysis which dismisses the idea of the Chinese using their geopolitical weight to get better deals seems a bit glib, in my experience. The usual method is to compare the price the Chinese pay to the commercial price, observe the lack of difference, and declare that anyone who sees anything suspicious is being paranoid.

But this ignores the widely held belief that we are in for a period of hefty price hikes for various resources. This may be true, it may not, but IIRC this belief is shared by much of the Chinese leadership. The long-term nature of the deals, combined with their timing (IIRC many were made soon after the Credit Crunch caused the prices of the relevant resources to crash) make it seem superficially plausible that the leverage, if any, the Chinese brought to the table was used to lock-in current prices through a period of price rises.

Now, this doesn't mean the alarmists are right. The prices paid may be linked to the world price (I can't confirm or disprove this with a few minutes googling). Even if they're not, the Chinese may have acted similarly to any other huge buyer. Even if they didn't, this would be China trying to establish a demi-hegemony of her own, and not really imperialistic. Hyperbole sells news, and “Rise of the Dragon!” is certainly eye-catching. But there may be a grain of truth here, and your post seems to fit into a school of excessively casual debunking I find irritating.

Onward to definitions. I'm having a hard time wrapping my head around how one method of controlling other polities can define a specific type of polity. At least, not without either stretching your terms so far as to be useless, or by being so narrow as to be useless. I don't think either was your intention, so maybe I'm misunderstanding something?

I'm also having a hard time seeing how America goes beyond the normal definition of hegemony. The pithiest summary of the imperial vs. hegemonic distinction I've read was based on direct vs. indirect force, and direct force clearly makes up a tiny fraction of America's influence despite the dreams of wingnuts (not that I'm saying you're a wingnut). Not sure where you're getting the “hegemons don't interfere in the internal policies of subordinate states” definition from – all states will interfere with other states if they think they will benefit – but you know way more political science and international relations theory than I do, so I'm likely missing something.

Wow, that was more verbose than I intended. Hopefully it will make some kind of sense.

[Noel Maurer]

No worries on verbosity.

(1) On China: The Chinese loans-for-oil contracts that I have seen all involve delivery of oil at the market price during the month of delivery. The "equity oil" deals do not, but what they do is in effect give the Chinese a fixed percentage of production after royalties, taxes and production-sharing. None seem to have had better-than-expected provisions.

(2) On Empire: I don't follow your argument completely. That said, semantic discussions are fairly useless, I think. Here is a good discussion of the issue, which concludes that it is a distinction without a difference.

Where I'm lost is in your question about methods. Sanctions aren't really a method --- rather, aerial bombardment, police searches, and blockades are different methods of applying them. Rather, sanctions are punishments, and when one political community controls the policies of another via the credible threat of sanctions, the only reason I can see not to call that "imperialism" is that you approve of the threatening. I often do approve of such things, but in this particular case I don't think there's much reason to sugar-coat it.

For an example of my own inconsistency, see the earlier discussion of the U.S. and U.K. in the Bahamas. Since the democratically-elected Bahamian government has voluntarily relinquished much of its sovereignty to the U.S. and U.K., it isn't clear that I should be calling that empire.

[setty]

I hope you've now seen the unredacted text of that embassy memo.

In it, you can see that the embassy itself had doubts about its source for this $5 a barrel information, PDVSA board member Fadi Kabboul. The embassy people's experience with him was identical to mine. He offers meetings and information and never comes through. He revises history. We don't know anything about his motives.

Hence, I am loath to trust him on that $5 a barrel figure. Especially since there is evidence contradicting the $5 a barrel figure -- it's pretty clear from the contracts that China was supposed to pay more than that.

It is possible that PDVSA received only $5 a barrel for some shipments. But if that happened, I would bet that the gap between market price and $5 a barrel ended up in someone's pocket. I think it's a very long stretch to say that this price shows China has an imperial subject in South America.

Indeed, the most telling item in that memo is the hearsay about George Kabboul. George was at the time head of the shipping department of Venezuela's state oil company. Previously, he headed its food division, an agency called PDVAL. A 2009 U.S. federal lawsuit named him as having demanded a $2 million bribe to let a ship land and deliver perishable food. Around the same time, pro-Chavez Venezuelans also denounced him for corruption. I don't have independent information about him, and he isn't here to defend himself, so please take all this with a grain of salt.

Which is why it's amusing to read that when the U.S. invited him to come and chat with their information-gathering team, he was worried that he might be "in trouble." Would any Venezuelan worry that the Chinese embassy had called him in because he was "in trouble"?

Whose empire is this, anyway?