Canada caught in geopolitical energy struggle between China and the U.S.

What is a middle power with an overabundance of natural resource assets to do when the rising rival of its most crucial ally — politically, militarily, economically — comes knocking?

That rival is China; the ally, the United States of America. Canada and the Harper government appear caught in the crosshairs of a geopolitical energy struggle.

Already, U.S. lawmakers have begun to raise the alarm over China’s growing stake in Canadian oilsands development. The pending sale of Canada’s Nexen for $15.1 billion to China National Offshore Oil Corp. (CNOOC) is deeply unpopular with Canadian voters, with a majority unhappy at the prospect of a Chinese state-owned enterprise owning a controlling stake in a Canadian energy gem.

Gone are the days of Prime Minister Stephen Harper braying self-righteously about Canada’s refusal to “sell out to the almighty dollar” and confronting China’s notorious human rights record. What remains is a prime minister who has grown more pragmatic at the helm, having recognized that Canada holds an important card to play as an energy security power during a seismic shift of the global economic centre of gravity toward the Asia Pacific.

China’s governing regime needs to keep growing its economy in order to maintain political stability, and requires an ever-increasing supply of fossil fuel energy to power its manufacturing-heavy economic growth model. Canada is perfectly positioned to exploit this demand, and profit handsomely from an assured and increasing Chinese hunger for our abundant black Alberta gold.

But this relationship must be about more than economics.

While regional bickering as well as the continued political legacy of the defunct National Energy Program mean that Canada will likely never have something akin to a Norwegian sovereign wealth fund, Canada has an even bigger global opportunity.

Growing more enmeshed economically with China represents the best opportunity any western entity has to “socialize” the Chinese regime into complying with international standards on trade, labour and human rights.

Canada has made headway in this regard already, with last month’s announcement of a bilateral agreement to help protect Canadian investors in China and ensure reciprocity of access. It was a small yet meaningful step in the right direction.

Crucially, Canada’s government has learned that dangling the carrot of energy security is a more valuable bargaining chip than harsh public criticism of China’s leadership. Canada’s reputation as a middle power facilitator may never encounter a tougher challenge or greater opportunity than socializing the Middle Kingdom.

The Canadian government must respect the review process in the Investment Canada Act regarding proposed Chinese investments in Canadian oil companies. The result of the “net benefit” test must be made clear and transparent to all Canadians, and the recommendations must not be encumbered by political calculus. Otherwise, Canadians will be left believing that the federal government’s recent rejection of the Petronas takeover bid was nothing more than political cover for the expected approval of the pending Nexen bid.

Original Article
Source: the star
Author: Matthew Lombardi