U.S. Wants China to Enter IEA

BEIJING -- The U.S. has asked that China join the International Energy Agency, which was set up after the oil shocks of the 1970s to help developed countries manage emergency oil supplies.

A U.S. official announced the request Tuesday in Beijing, saying it could bolster the IEA's ability to weather soaring energy prices. The announcement reflects a growing recognition that without participation from China and India, economic institutions like the IEA -- now made up largely of the world's richest nations -- could become less relevant.

It also comes at time of increased concern over how China plans to use its own growing fuel stockpiles and its energy policy in Africa and Central Asia as more analysts are predicting that oil prices could hit $200 a barrel.

"China should consider a declaration that it plans to pursue membership in the IEA. This could help ameliorate the anxiety expressed in some quarters over China's intentions as it pursues greater energy security," U.S. Assistant Secretary of State Daniel Sullivan said Tuesday at a conference in Beijing with Chinese and U.S. energy officials and industry executives.

Chinese officials say they want to cooperate more closely with the IEA but can't join because the group is part of the Organization for Economic Cooperation and Development, which includes most of the world's richest countries who it says are "committed to democracy and the market economy." Communist China's status as a developing country impacts issues such as international aid and its status in global talks on such issues as global warming, where it is held to a lower standard than rich countries.

U.S. officials said the IEA's charter could be re-written to include China and India, acknowledging their status as developing, but hugely important, countries.

"From the perspective of an IEA member like the United States, China's participation in the IEA's collective emergency response system would make the system stronger, which will enhance U.S., Chinese, and global energy security," Mr. Sullivan said in a speech at a U.S.-China Energy Forum.

The U.S. is the world's biggest energy consumer and top oil importer, but China will soon surpass Japan as the world's second-biggest oil importer thanks to a booming economy that has nurtured a car-buying frenzy in the growing middle class. International oil futures have topped $125 a barrel despite White House efforts to convince the world's biggest producers to pump more.

China is still predominantly dependent on coal. On Tuesday, the government said that coal stockpiles had fallen below warning levels in several regions, including central China's Hebei, Anhui and Hunnan provinces, as well as Beijing and northern China's Inner Mongolia. Just this winter, China had devastating blackouts after winter storms hit while stockpiles were low. Power companies are reluctant to buy because coal prices are rising but electricity prices have been caped.

Since it was founded, the IEA has coordinated the release of strategic petroleum reserves only twice, once during the first Gulf War in 1990 and then again after Hurricanes Rita and Katrina in the U.S. in 2005. One of the biggest obligations for members is to hold 90-days worth of oil imports in strategic petroleum reserves that in theory can only be released in consultation with the other member nations.

Despite its growing oil demand, China only started building up emergency oil stockpiles about two years ago, filling up tanks with 33 million barrels of oil, or less then 10 days of imports. Official say they plan to build up to about a month of imports, around 100 million barrels, but haven't set a timetable yet.

That has built up a an insurance cushion for China in case of a major supply disruption, but the tanks are being managed by state-oil firms, prompting some to worry that China would use the extra oil to manipulate markets in its favor. If it joined the IEA, China would pledge to follow international norms and coordinate any release with other members.

(The Wall Street Journal)

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