China has been talking to Russia about Siberian oil for a decade, and its need has grown acute. It is on a pace to overtake Japan next year as the world's second-largest oil consumer, and to catch the leader, the US, sometime around 2030, by quintupling its current demand. Energy shortages plague the country, with 21 provinces experiencing rationing and blackouts so far this fall and winter, twice as many as last year. A Russia-China pipeline, Chinese officials say, would be a natural north-south marriage between Asia's largest oil exporter and what will soon be Asia's largest oil importer.
Japan, whose demand for oil is slowly falling because of anemic growth and a shift from manufacturing, came later to the game, making a serious alternative proposal only a year ago. But it has steadily sweetened its bid, while the financing of the Chinese plan remains fuzzy.
Japan now is offering to put up US$5 billion for pipeline construction and another US$2 billion for oil field development, while holding out the prospect that a pipeline to the Sea of Japan could handle oil exports to America, too.
The pipeline rivalry offers a taste of more battles to come, as China moves aggressively to secure access to resources it needs to keep wheels spinning in "the factory to the world."
Moving around Asia, China is financing copper and coal mines in Mongolia, building another oil pipeline in Kazakhstan, negotiating natural gas development in Turkmenistan, buying gas fields and signing long-term supply contracts in Australia and Indonesia and buying steel in South Korea.
So far, the biggest market impact has been on industrial commodities like coal, copper and iron ore. Many have reversed long declines and started rising, as Japanese, Taiwanese and South Korean manufacturers find themselves competing with China for supplies and bidding prices up. But in oil, Japan and China are competing over more than just price.
"We are about to enter an age in which Japan and China scramble for oil," Yoichi Funabashi, international affairs columnist for Japan's Asahi Shimbun, wrote recently. "China acts, and Japan reacts. Now, we are losing the oil race."
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