Now that Ping Ping and Fu Shuang have debuted at the Atlanta Zoo, it is a good time to build on Panda diplomacy and encourage China to be more transparent on the size and use of its estimated 1.3 billion barrel strategic petroleum stockpile. Admittedly, drawdowns from this large stockpile played a calming role at the height of the Hormuz Crisis, and it is now in the mutual interest of China, its APEC neighbors, and the world’s major economies to bring its operations into the light of day. The upcoming APEC Leaders Summit in Shenzhen, and the G20 Summit in Miami, provide two timely opportunities to do so. An international organization that Henry Kissinger helped to establish, the International Energy Agency, can also play a helpful diplomatic role to help get this done.
APEC economies are the most keenly affected by recent oil market instability. It is in the interest of APEC members to use the November 18-19 Shenzhen Leaders Summit to press their Chinese hosts to live up to oil stockpile transparency commitments the country has already made through its existing affiliate status with the International Energy Agency.
The International Energy Agency, founded after the oil shocks of the 1970s, requires its OECD centric 32 member states to keep oil stockpile reserves equal to 90 days of their net oil imports. The IEA triggered a, successful, 400-million-barrel drawdown of strategic oil stocks at the beginning of the Hormuz Crisis. China also paused the build of, and drew oil from, its oil stockpile, but without sharing critical information on drawdown rates or market timing. This lack of transparency worked against China’s own goals, reducing the market calming impact that coordination with the IEA would have given world markets.
A decade ago, the IEA began an effort to engage with non-member countries, like China, to assure that respective stockpiles are deployed efficiently. China accepted a role as an Association Member of the International Energy Agency. This effort broke down as China pursued the Belt and Road, and OECD countries abandoned their wishful goal of enticing China as a strategic stakeholder in the global economy. Nevertheless, the OECD can now benefit, at least, from China’s vast oil inventory building, and targeted cooperation on strategic stockpiles can still benefit the global economy.
The IEA’s Joint Declaration on Association calls on the organization’s Associate member countries, like China, to “build and maintain emergency reserves and collaborate with the IEA in their use at the time of emergencies.” The IEA counts many APEC economies as member states and could use its clout as an international organization to dust off these nascent efforts to work more closely with China on major oil response drawdowns, to mutual benefit.
The United States hosted a G20 Energy Abundance Ministerial in September in Houston and will host the G20 Leaders Summit in December in Miami. The G20 includes major OPEC producers, like Saudi Arabia, and the world’s major energy consuming countries, including China. As the Houston Ministerial demonstrated, there is already clear G20 mutual interest to work together to foster energy market stability. The United States, as host, and as a follow up to the Trump-Xi summit, has an excellent opportunity to broaden the agenda of the Leaders meeting to specifically include greater transparency in the building and use of strategic oil stockpiles. Such an initiative need not threaten China, which remains dependent on Persian Gulf oil and perhaps benefited the most from the IEA’s effective stock drawdowns.
A call for greater oil market transparency by China’s APEC neighbors would be a good way to start this important conversation. The IEA can play a useful role in leveraging multilateral diplomacy to advance this goal, and the United States, as it has done before, can demonstrate to China that cooperation on specific areas of mutual interest benefits everyone.
Matthew McManus is a Senior Fellow at the National Center for Energy Analytics and a professor at Georgetown University.
This article was originally published by RealClearEnergy and made available via RealClearWire.
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[ H/T WorldNetDaily ]
