Chess has only two outcomes: draw and checkmate. The objective of the game is absolute advantage; that is to say, its outcome is total victory or defeat, and the battle is conducted head-on, in the centre of the board. The aim of go is relative advantage; the game is played all over the board, and the objective is to increase one's options and reduce those of the adversary. The goal is less victory than persistent strategic progress .
China and Growing Energy Demand
The New Great Game that is currently being played out on the global stage is interesting and contains risks comparable with the actions taken by the USA in the Middle East in the past. In this new game the main player is China and the emergent countries of the Asian Pacific.
Under the geopolitical profile, China is disconcerting first and foremost for its demographic and territorial dimensions and for its position. China, having the largest population in the world and being the second largest country in Eurasia, is placed in a strategic position between India, Russia and Japan.
China has based everything on economic growth, for which the main driving force is energy. Energy for continuing growth and energy for production of food and nourishing the fast developing city habitants is a must for China. Two-thirds of China's cities face shortages, while deserts are eating up arable land. As ongoing growth requires massive inputs of energy and minerals, Chinese companies have spread all around the world for supplies. Energy is a finite commodity, conventional and cheap oil has gone forever.
The main energy resource suppliers of China are the Gulf, countries of the Caspian region and Sudan. At the same time, the USA is also very much interested with this defined geography, therefore, energy resources, oil and gas, remain at the heart of the game.
There are vast distances between the countries that supply and consume this commodity. The biggest importers are the USA, Western European countries and Asia Pacific countries. On the other hand, the main exporters are countries from the Middle East and North Africa (MENA), the Russian Federation (RF), Mexico, Norway and Venezuela. England will be neutral until their declining North Sea reserves come to an end and then, they will be in the category of "importing countries". Nevertheless, the fast growing economies namely that of China and India will be one of the main importers and will heat up the competition.
According to the figures of EIA related to world oil trade by the producing and consumer countries as by years 2003 and projected 2030, Persian Gulf countries supply 22.5 million barrels per day (MBPD), about 43% of the total world demand, in 2003, and will be supplying 34.3 MBPD, 44.4% of the total world demand, in 2030 and being 71% of the total OPEC.
On the supply side, oil production outside the core OPEC countries is reaching a peak, which is not good news for the International Oil Companies (IOCs). The National Oil Companies (NOCs) will determine future oil supply.
Either in OPEC, and/or non-OPEC production, the NOCs production is increasing. In Table 1, for year 2005, the world's largest oil and gas producers are given. Out of the sixteen companies listed, ten of them are NOCs whereas in the first ten ranking, eight of them are NOCs. This means that in the near future oil prices will no longer be under the control of multi-state/international capital or 7-sisters. Saudi Aramco/Saudi Arabia, NIOC/Iran, INOC/Iraq, PdVSA/Venezuella, Petrochine/China, Gazprom/Russian Federation, Petrobas/Brazil and Petronas/Malasia are members of the new unofficial organisation of NOCs, "New 8-Sisters". This might result in either increasing or fluctuating oil prices or more stable, speculator-free market conditions.
Table 1: World's Largest Oil and Gas Producers by Output (2005)
On the demand side, China and India are transforming global energy markets through their sheer size and rate of economic growth. Between 2005 and 2030, China and India will account for 70% of new global oil demand. China and India will be responsible for 45% of total energy demand growth from 2005 to 2030.
By 2010, China will be the world's largest energy consumer, overtaking the USA. The global energy system is on an increasingly unsustainable path and at this stage China and India are transforming global energy markets.
With accelerating economic globalisation, China has forged increasingly closer ties with the outside world in the field of energy. Chinese NOCs often seek sites in Sudan, Iran or Syria, where the IOCs are either prohibited from investing or hesitant to do so out of fear of host-country political risk or damaging negative publicity. Chinese NOCs are less worried about public perceptions associated with such investments. As given in Table 2, the biggest investments of Chinese NOCs are in Africa and Former Soviet Union countries .
China's NOCs are locking up resources through equity deals and thus taking oil off the market and out of reach for other buyers. Underlying these concerns are two assumptions: first that Chinese firms sell the oil they extract overseas only to consumers at home and second that doing so somehow reduces the amount of oil available to others.
China is now the world's second largest energy producer and consumer (coal). The sustained growth of energy supply has provided an important support for the country's economic growth and social progress, while the rapid expansion of energy consumption has created a vast scope for the global energy market.

Table 2: Global Presence of Chinese Oil Companies (2006)

Besides China, Korea and Japan are the biggest importers in the Asia Pacific region. Their main suppliers are Middle Eastern and African countries (Figure 1)5.

Figure 1: Oil Imports by Region of Origin (2006)

China, having investments especially in Sudan, is very much dependent on the oil imports from this country and transport straits (Figure 2)6.

Figure 2: Sudan's Oil Exports by Destination (2002-2006)

China is developing its relations with the Middle East. In 2006 Iran supplied 12% of China's oil demand and became its third largest supplier. Also, China has started to develop close relations with Saudi Arabia, Saudi Arabia being the chairman of the Gulf Cooperation Council (GCC). In 2006 China imported 45% of its oil from the Gulf region. By signing the free trade agreement with GCC, the trade volume which was 1.5 billion $ in 1991, reached to 66.2 billion in 2006, GCC becoming the 8th biggest trade partner of China7.
Resources of the MENA Region
The MENA Region is, geographically, the richest area concerning oil and natural gas resources. Besides having huge resources, it is also the cheapest area for exploration and production of these resources. Global oil and natural gas resources are given below as of the end of 2004 (Figure 3). MENA holds 61% of the world's proven oil reserves and about 45% of gas reserves and its share of global production in 2004 was 35% for oil and 15% for gas. In MENA, the share of the Gulf region is the biggest. In the case of oil, the Gulf region (Saudi Arabia, Iran, Iraq and Kuwait) sums up to 47%, whereas for gas, Iran, Qatar, Saudi Arabia and the UAE sums up to 37%. This means that most of the oil and gas trade (as LNG) takes place around the Persian Gulf and/or the Hormuz strait8.
The region's vast reserves and its low production-to-reserves ratio means that it has the potential to provide much of the additional oil and gas that the energy importing countries -including the majority of OECD - will need in the coming decades. Whether and how, development of these resources will affect the evolution of energy prices and the global energy balance, with significant implications for the global economy remains to be seen.
The share of the MENA Region in the global oil and gas trade is over 40% in gas and 60% in the case of oil (Figure 4). These figures are proof of the importance of the region and the emerging transport routes from this area. This situation explains briefly the interest of OECD countries, especially the USA, on the security issues of this region and why they are so interested and concerned about these countries9.

Figure 3: Share of MENA and Gulf Region in Proven Global Oil and Gas Reserves
(End 2004)

Besides the irresistible importance the Middle East bears due to its vast energy resources, the international trade of oil, oil products and LNG from this area is also of great importance.

Figure 4: MENA Share in the Global Oil and Gas Supply, % (End 2004)

The MENA area has been and will continue to be a critical player in meeting global demands and in providing oil exports for simple and straightforward reasons. It has more oil, its oil is cheaper to produce and it has the infrastructure to export these resources cheaply and in large quantities. The cost for additional production is low by comparative standards and domestic demand for oil in the MENA region is relatively low in comparison to total production capacity. In fact, if some major breakthrough in other sources of energy or conservation should reduce the global demand for oil, higher cost producers in other areas would probably have to either cease or reduce production.
The world's total oil reserves that are in the MENA area have increased steadily for a quarter of a century regardless of conflicts and political instability in the region and exports from this area will still continue for the coming decades (Figure 5)10.

Figure 5: MENA Oil Exports by Country (mbbl/d)

As indicated before, there is a huge geographical gap between energy producing and consuming countries regarding oil and natural gas/LNG. This gap can only be bridged by building pipelines or the use of the maritime transport infrastructure. In 2007, total global oil production amounted to approximately 85 million barrels per day (mbbl/d), and around one-half, or over 43 mbbl/d of oil was transported using tankers on fixed maritime routes.
LNG is regarded as an important gas export commodity for countries with large reserves of natural gas as it allows these producers to access new and distant markets; for consuming economies, in particular the US, Western European Countries and Asia Pacific, it is an instrument of diversification of primary energy.
Importantly, vast quantities of oil and LNG must pass through highly critical choke points. In the trade of global oil and LNG, there are six critical transit strait/choke points. These transit choke points are a critical part of global energy security. These choke points are narrow channels that are used widely alongside global sea routes. They are the critical part of global energy security due to the high volume of oil traded through these narrow straits.
The international energy market is dependent upon reliable transport. The blockage of a choke point, even temporarily, can lead to substantial increases in total energy costs. In addition, choke points leave oil tankers vulnerable to theft from pirates, terrorist attacks and political unrest in the form of wars or hostilities as well as shipping accidents which can lead to disastrous oil spills.
As a result, "energy supply security", assuring sufficient oil and gas production and in particular protecting and enhancing transport systems are key elements within supply depots and consumer facilities.
The geographic position, physical and trade data, possible alternative routes for the straits mentioned are given in Table 3 below11. Alternative routes are indicated in the last column of the table. Even though they are named as "alternative routes", economically and physically, there are no alternative routes.

Table 3: World Critical Maritime Transit Choke Points

The Strait of Hormuz leading out of the Persian Gulf and the Strait of Malacca linking the Indian and Pacific Oceans are two of the world's most strategic choke points, especially of the transport load. Other important passages include: Bab el-Mandab which connects the Arabian Sea with the Red Sea; the Panama Canal and the Panama Pipeline connecting the Pacific and Atlantic Oceans; the Suez Canal and the Sumed Pipeline linking the Red Sea and Mediterranean Sea; and the Turkish Straights joining the Black Sea and the Caspian Sea region to the Mediterranean Sea.
The Persian Gulf, therefore Hormuz, is the world's most important oil choke point due to its daily oil flow of 16.5-17 million barrels, which is roughly two-fifths of all seaborne traded oil. Located between Oman and Iran, the Strait of Hormuz connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. The majority of oil exported from the Strait of Hormuz travels to Asia, the United States and Western Europe. Currently, three-quarters of all Japan's oil needs pass through this Strait. By 2030 about 28% of the world's oil and 4% of gas is expected to flow through the Straits of Hormuz.
The Strait of Malacca, located between Indonesia, Malaysia and Singapore links the Indian Ocean to the South China Sea and Pacific Ocean. Malacca is the shortest sea route between Persian Gulf suppliers and the Asian markets notably China, Japan, South Korea and the Pacific Rim. Oil shipments through the Strait of Malacca are the key choke point in Asia with an estimated flow of 15 million bbl/d in 2006.
The Strait of Bab el-Mandab is a choke point between the horn of Africa and the Middle East and a strategic link between the Mediterranean Sea and Indian Ocean. It is located between Yemen, Djibouti and Eritrea and connects the Red Sea with the Gulf of Aden and the Arabian Sea. In 2006, an estimated 3.3 million bbl/d flowed through this waterway toward Europe, the United States and Asia, especially to China.
The most important four straits/choke points are shown in Figure 6 with the oil flow figures of 2004 and possible transport loads for the year 2030.

Figure 6: Transport Routes of Oil Imported from the Gulf Region

To control and secure the energy sources and transport routes of this geography (MENA Region, Persian Gulf, Hormuz, Bab-el Mandab and Malacca straits) have always been the main concern of the USA. Time to time this mission has resulted in invasions of the countries concerned (e.g. Afghanistan and Iraq).
The aim of the USA in controlling the energy sources and trade routes is not only for securing their present and future energy demands and/or the continuation of the trade of IOCs in this region. The USA imports only 22% of its oil demand from this region. Besides the USA's indigenous production, Venezuela, Mexico, Norway and Canada are the main suppliers of oil and gas.
Therefore, the USA's main aim is to control the supply of energy to the developing economies of the world (EU, China, Japan and Asia Pacific) and define the currency to be used for this huge single trade item.
As shown in the maps below, with the commands established (CENTCOM and PACOM), USA controls the whole of the MENA, Middle Asia and Pacific region s12 .
Central Command (CENTCOM) is a unit of the U.S. armed forces established in 1983. It was originally conceived of as the "Rapid Deployment Forces". Its area of responsibility is in the Middle East, East Africa and Central Asia. CENTCOM has been the main American presence in many military operations, including the Persian Gulf War, the United States war in Afghanistan, and the 2003 invasion of Iraq. Forces from CENTCOM are currently deployed primarily in Iraq and Afghanistan in combat roles and have bases in Kuwait, Bahrain, Qatar, the United Arab Emirates, Oman, Pakistan, Djibouti and central Asia in support roles.
Pacific Command (PACOM) is the oldest and largest of the ten Unified Combatant Commands based in Honolulu, Hawaii on the island of Oahu. PACOM's sphere of control extends from the west coast of the USA mainland to the east coast of Africa (excluding the waters north of 5° S and west of 68° E), encompassing East Asia, South Asia, Southeast Asia, Alaska, Madagascar and Oceania. It also has control over U.S. military operations in the Pacific, including the state of Hawaii, Indian Oceans as well as over forces in Alaska.

The rapid growth of global energy consumption, under-investment in production refining and distribution capacities, terrorism and a resurgence of "energy nationalism" are endangering a fragile international balance of forces and putting strong pressure on international energy markets. The situation is further aggravated by the variety of approaches to energy security.
The conflicts between the USA and China related to energy and transport routes bound up on the axis of the three straits and sea highway are shown in Figure 7. The first and main strait is Hormuz, which enables the exit of Gulf resources to the world markets and China. The second is the Bab el-Mandab strait, from where Sudanese oil (where most of the Chinese NOCs investments exist) is transported to China. The third main connection is the Malacca strait, which enables transport routes to reach China and Asia Pacific.
The USA, in its aim to control the region and flows of energy resources to China, India and Asia Pacific, has achieved this by "coup d'etad" or by forming alliances with governments around these straits.
Somali, Djibouti and Yemen have coasts to Bab el-Mandab. The USA has increased its military forces in these countries pleading possible terrorism in this region and has subsequently established a military base in Djibouti. Yemen is an ally country in the Greater Middle East and North Africa (GMENA) initiative. Therefore, only Somali was under probation and with the aid of Ethiopian armed forces, in March 2007, the anti USA government was altered. As a result, the complete control of the strait and flow of oil flowing to China from Sudan came under the full control of the USA.
The Malacca strait is of great importance to China also. This strait is the only convenient passage for the transit transport of oil exiting from either Bab el-Mandab or Hormuz.
The other dimension of the tension connected to control of the three strategic straits and the sea highway is Iran. As mentioned before, the close and fast developing relations between China and Iran is a result of the huge supply of oil from this country. Iran also holds the control of the Hormuz strait from where about 43% of the tanker flow is executed.
China has started a kind of "power race" in the Indian Ocean by accommodating a fleet at Gwadar Port13.
Therefore, in accordance with the strategy developed by China, strengthening its navy/fleet and constructing military seaports/harbours in Gwadar, Bangladesh, Myanmar, Thailand and Cambodia, it might be perceived as a counter strategy against the dominance of the USA in this region by CENTCOM and PACOM and the start of a concealed conflict between China and the USA connected to energy security. The geography of conflicts is shown in Figure 714.

Figure 7: Choke Points, Sea Highway in Indian Ocean and Chinese "Mare Nostrum"

Paul Kennedy15, emphasising the strategies of Asian Pacific and Chinese Governments in development and modernisation of their naval forces, points out the report submitted by the Congressional Research Service entitled "China Naval Modernization: Implications for U.S. Navy Capabilities" and underlines the paragraph "...The details are extensive, and look impressive. Perhaps the most important facts are tucked into the first footnote: By 2010, China's submarine force will be nearly double the size of the U.S. submarine fleet the entire Chinese naval fleet is projected to surpass the size of the U.S. fleet by 2015. We should note that this quotation actually comes from the American Shipbuilders Association, with its very distinct interests in this matter. And it is hard to believe that the U.S. government would let such a dramatic shift in the naval balances ever come to pass. But one cannot gainsay the important fact that everyone in Asia, apparently, believes that it is vital to enhance maritime power.

Even a smallish power like Vietnam is, according to The Military Balance, increasing defence spending significantly during the current decade, with the navy receiving substantial infusions of new equipment." And criticizing the strategies of European Countries, concludes his article with the words "Armchair strategists will rush in with many answers to that question: For example, that Asia is more likely to see interstate conflicts in the future than Western Europe, China is determined to curb U.S. hegemony in the Pacific and everyone else is scared of China's military build-up, and, in any case, these faster-growing economies can afford both guns and butter. All of that may be true. But the plain fact remains that, in an age of great geopolitical uncertainties, the leading European nations are ignoring the ancient Elizabethan caution: Look to thy Moat. Can that really be wise?"
The international community, including global businesses, should recognise that "energy sovereignty" resulting in firmer control of energy resources and transport infrastructure is a normal, understandable economic and political phenomenon, incorporating a number of positive trends and under reasonable cooperation and sharing of resolution.
Nations have developed their own methods for modernisation, which prioritises their own country's long-term economic, political and social interests. In the energy sector this trend has resulted in a resurgence of the "energy sovereignty'" approach. Energy producers have a natural and legal right to consider energy resources as part of their national sovereignty.
However, all parties concerned need to understand the importance of a new political reality and to develop a set of mutually beneficial "rules of the game".

Endnotes
1)Henry A. Kissinger, "America's Assignment", Newsweek, November 8, 2004.
2) EIA-Energy Information Administration, International Energy Outlook 2006, www.eia.doe.gov
3) "China Energy-A Guide for the Perplexed", Daniel H. Rosen/Peterson Institute for International Economics, Trevor Houser/Colin Powell Centre for Policy Studies, "China Balance Sheet", May 2007
4) Equity deals refer to standard industry production sharing agreements where the foreign oil company is given the right to sell a specified share of the oil it produces. Nothing is fundamentally different from those signed by IOCs.
5) "China Energy-A Guide for the Perplexed" ,Daniel H. Rosen/Peterson Institute for International Economics, Trevor Houser/Colin Powell Centre for Policy Studies, "China Balance Sheet", May 2007
6) Ibid
7) Suna Lee, "China's Middle East Perspectives are Strengthening", 11.07.2007, ASAM, www.asam.org.tr
8) IEA-International Energy Agency, " World Energy Outlook 2005-Middle East and North Africa Insight"
9) Ibid
10) IEA-International Energy Agency, "World Energy Outlook 2005", www.iea.org
11) EIA-Energy Information Administration, "World Oil Transit Choke points", January 2008, www.eia.doe.gov
12) Wikipedia the free enc. "CENTCOM", "PACOM".
13) Sunday Telegraph, "China is accused of fuelling Pacific arms race", news /2007.04.01, www.telegraph.co.uk
14) Eurasian Review of Geopolitics," Geopolitical Maps", www.hearthland.it
15) Paul Kennedy, "The Rise and Fall of Navies", International Herald Tribune, www.iht.com/articles/2007/04/05/

*Energy Strategist (Former BOTAŞ Chairman and CEO)