A JAPANESE school in the Chinese city of Dalian will be short of geography textbooks next year and it is all because of oil and a group of tiny islands in the East China Sea.

Chinese customs officials last month impounded the books because they contained maps that were offensive, showing China and Taiwan in different colours, a graphic refutation of China’s claim to sovereignty over Taiwan. More importantly, the maps identified as part of Japanese territory eight uninhabited islands known as Senkaku to the Japanese but which the Chinese call Diaoyutai. The disputed islands and surrounding ocean in the East China Sea are said to conceal vast deposits of oil and gas, and both countries are desperate to secure new supplies of fuel.

Last weekend, China’s pride and ambition was again snubbed, but this time in Moscow, where President Hu Jintao ended a meeting with President Vladimir Putin without securing the promise of an extra drop of oil for China.

It was the second important Chinese diplomatic overture to Russia and the second disappointment. Last September, Wen Jiabao, China’s Prime Minister, was in Moscow to discuss energy links, in particular an oil pipeline linking Angarsk, an oil hub in Eastern Siberia, with Daqing, China’s oil capital and the site of several refineries.

Transneft, Russia’s state pipeline company, is reluctant to invest so much in a single customer and suspicious of China’s desire to “capture” Russian oil supplies. Even as the Prime Minister was shaking hands with the President, Russia’s ambassador in Tokyo announced that Transneft would build its eastern pipeline to Nakhodka, a port near Vladivostock, ideal for exports to Japan.

If President Hu is prepared to beg, it is because he has no choice. China’s oil consumption is escalating at a frantic pace, rising 15 per cent last year, when it overtook Japan as Asia’s largest consumer. The International Energy Agency expects Chinese demand, currently 6.7 million barrels a day, to rise to 10.5 million by 2020.

China is thirsty for fuel but everywhere it turns, it finds Japan. The Japanese trading houses Mitsui and Mitsubishi are hoovering up supplies of liquefied natural gas from Australia’s North West Shelf to the Russian island of Sakhalin, offshore of Eastern Siberia.

In Moscow last week the Russian and Chinese leaders issued a communiqué containing promises of mutual support, but President Hu was rebuffed. He came for oil and he left with paper.

China has little choice but to look to Russia for oil and gas as supplies in the People’s Republic are dwindling. More than half its daily dose of oil comes from abroad and the nearest supply base is Russia, but Moscow is wary of its tumultuous Asian neighbour. Russia is in no hurry to develop its Eastern Siberian reserves, preferring to invest in the West and curry favour with Europe.

Japan must import its daily requirement of 5.5 million barrels, and the emergence of China as a competitor is troubling for both countries. Energy insecurity is rife in Tokyo and Beijing. China’s new oil companies have ventured abroad, copying Japan’s trading houses in seeking to buy access to reserves, not always successfully. CNOOC was gazumped in 2003 when it tried to buy a piece of Kashagan, a giant Caspian Sea oilfield. More recently, Chinese companies have been snapping up acres of Canadian tar sands, and last month CNOOC sparked a huge political row in Washington by offering to pay $18.5 billion for Unocal, the American oil company.

Meanwhile, in the East China Sea, the Japanese navy is patrolling the Senkaku/Diaoyutai islands, scaring off Chinese fishing vessels and repelling attempts by boatloads of Chinese protesters to land and claim sovereignty.

It is the oil and gas — perhaps enough to supply Japan for 80 years, some say — that excites both sides. CNOOC and Sinopec, the Chinese energy companies, are already developing the Chungxiao gas basin, an offshore field containing 200 billion cubic metres of gas, and the field juts into territory claimed by Japan.

Neither side is willing to divide the pie, whose true size is unclear. Last year Shell and Unocal withdrew for commercial reasons from a joint venture with CNOOC and Sinopec to explore the East China Sea. It was not the first time that the Anglo-Dutch company had backed out of a Chinese project. Shell, BP and ExxonMobil all withdrew from participation in China’s West-East gas pipeline, amid whispers that the 4,000km tube was a white elephant. It would be both ironic and alarming if the oil in the East China Sea proved to be a mirage.

HUNGRY RIVALS

China

Japan

2004 figures

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