China’s leadership needs to understand that for the time being, the world
oil market is a far better guarantor of energy security than a state tanker fleet pro-
tected by a blue-water navy. It would be very difficult to interdict private tankers
bound for Chinese ports at a distance from China. The global oil market is
highly fungible; ship destinations are unclear, since cargoes are often resold at
sea; and oil can be transshipped to China through third ports in the region.
The same logic applies to the Strait of Hormuz and other chokepoints. In addi-
tion, the number of tankers transiting key chokepoints would likely far exceed
any potential blockading navy’s physical ability to take control of uncooperative
ships, unless that navy was willing to apply disabling fire—and accept the ensu-
ing diplomatic and military headaches.^37Conclusions
While China is building a large number of VLCCs and other long-haul crude
tankers, Chinese tanker operators will work almost exclusively within the frame-
work of the existing global tanker market, at least during peacetime. It is highly
unlikely that China will try to circumvent the existing global tanker market
system entirely, because the opportunity costs of doing so would be very
high. Energy subsidies illustrate the cost of working outside the market, even to
a modest extent. China already pays its state oil companies billions of dollars in
subsidies annually to compensate them for losses they incur when buying oil
at market prices, only to be forced to sell products made from that oil at
government-capped rates within China. Tanker operations driven by economic
opportunity are more profitable than those driven by state directives. Moreover,
commercial deals struck by Chinese shipyards and shipping companies with
foreign operators are likely to further integrate Chinese firms into the global oil
shipping sector.
The precedent set by China’s national energy companies also favors the adop-
tion of a largely commercial approach to tanker-fleet operation. Although China
has spent billions of dollars on overseas equity oil acquisitions, the flagship state
firm CNPC sells the majority of its equity oil on the international market.^38
In sum, China appears to be profiting from shipbuilding and tanker operation
during peacetime while hedging its bets against future threats to oil shipments.
China will not build an ‘‘oil armada.’’ Security concerns are undoubtedly shaping
Beijing’s plans to have Chinese tankers haul Chinese crude imports, but given the
many shortcomings of this plan, its implementation will be driven almost
entirely by commercial concerns.124 Asia Looks Seaward