Friday, May 19, 2006

The great oil race:
Cheney discovers U.S. is losing out to China

Vice President Dick Cheney listens to Kazakhstan's President Nursultan Nazarbayev during a joint press conference at the Presidential Palace in Astana, Kazakhstan, on May 5. (AP Photo/Shawn Thew, Pool)

Vice President Dick Cheney has been entrusted with a task regarded as vital to bolstering the Bush administration's sagging political popularity: the search for additional crude oil in order to help stabilize U.S. gasoline prices over the next few months.

Mr. Cheney was recently sent to Central Asia and other regions to coax allies to significantly increase supplies to stabilize U.S. gasoline prices for the summer. Administration sources said Mr. Cheney has run into significant difficulties as he has found that many of the potential suppliers have become committed to China.

"We're in a race with China and so far we're losing," an administration source familiar with Mr. Cheney's trip said.

During his visit to Washington in late April, the sources said, Chinese President Hu Jintao brusquely rejected President Bush's appeal to cooperate on energy resources to ensure global market stability. Later, Mr. Hu visited Nigeria, which supplies about 17 percent of U.S. oil imports.

The sources said Mr. Cheney, who has long-time contacts in the industry, has been designated to find oil supplies both for the short- and medium-term.

They said Mr. Cheney's visit to Central Asia was based on the assessment of the U.S. intelligence community that Middle East oil supplies will become increasingly precarious after 2008.

The administration has determined that gasoline prices will become a major issue in congressional elections in November. A May poll taken by AP and Ipsos reported that 23 percent of respondents approve of the president's handling of gasoline prices, the lowest rate in the survey.

The sources said Mr. Cheney found his hosts in Central Asia to be distrustful of U.S. intentions, with some Muslim countries fearful of a regime change as that which took place in 2005 in Kyrgyzstan, regarded as the most pro-American country in the region.

Mr. Cheney also was informed of the contracts China has already signed with Central Asian republics. In April, Turkmenistan signed a deal to supply China with 30 billion cubic meters of gas per year from 2009 to 2039. The price has not yet been determined.

"Even if many analysts doubt Turkmenistan's ability to meet this contract, that deal evokes the contradictions inherent in China's transitional phase," the Washington-based Jamestown Foundation said in a report. "In its substance it evokes the old approach: China subsidizing dictators by paying for pipelines as well as for gas and trying to knock prices down while tying up the producer for 30 years."

A key target of Mr. Cheney's visit was Kazakhstan, regarded as the richest oil and natural gas state in the region. The vice president, in contrast to the other countries he visited, did not discuss the need for democracy in Kazakhstan, whom he described as a "key strategic partner of the United States."

"Obviously Kazakhstan is important given their considerable resources," Mr. Cheney said on May 5 on his return to Washington. "It's one of the few places where we're going to see an increase in oil production from a non-OPEC state over the next few years."

The sources said Mr. Cheney sought to exploit a rift between Russia and states in Central Asia. The vice president was highly critical of Moscow's use of energy, particularly transport rights, to intimidate its neighbors.

At the same time, the Bush administration has been pressuring Kazakhstan to export oil through the Baku-Tbilisi-Ceyhan pipeline that would bypass Russia and supply Europe and the United States. The sources said the Kazakh agreement to join the trans-Caspian project could be signed in June.

Congress has been growing increasingly concerned over soaring gasoline prices. On May 9, members of the Senate Commerce Committee accused the administration of failing to employ technology designed to increase automobile fuel economy.

"The president and I are committed to improving fuel economy across the board through an open regulatory process built upon sound science and economics, but we will not accept an arbitrary statutory increase under the current passenger cars system," Transportation Secretary Norman Mineta told the committee.