American policymakers and China-watchers worldwide often parse Chinese President Xi Jinping’s words, looking for clues about whether the leader intends to fully untangle the web of institutions and norms that have governed so much of the last 70 years or to merely reform it. A week ago, Xi spoke to a gathering of the so-called BRICS countries -- which include Brazil, Russia, India, China and South Africa -- and urged them to take an active role in shaping a more “just” world order. While some might read this exhortation as a call to radical action, others could see it as a mere rallying of the troops to modify the existing order to be better suited to the needs and viewpoints of emerging power centers, China foremost among them. In short, the jury is still out on how disruptive China intends to be.
In his far-reaching book “World Order,” former Secretary of State Henry Kissinger described the period between 1948 and the turn of the century as “a brief moment in human history when one could speak of an incipient global world order composed of an amalgam of American idealism and traditional concepts of balance of power.” That moment was a product of enormous effort on the part of the U.S. and its Western allies to create and sustain the set of norms, institutions and frameworks undergirding an international order based on the values of participatory governance, respect for state sovereignty and liberal economic interaction.
Much of the world did well under this system. Democratic governance, by no means universal, is treasured by those who have it and desired by many who do not. While nonstate actors have risen in importance, states, by and large, have remained the main protagonists on the international scene. The liberal economic order has been even more successful, driving a period of unprecedented economic prosperity in which more than a billion people have been lifted out of extreme poverty since 1950. Wars have not ceased, but as pointed out by Harvard professor Steven Pinker, organized violent conflicts of all kinds have diminished in the past quarter-century.
This liberal international order, however, is under strain from both of the two tendencies that eventually challenge every world order in the view of scholars and statesmen. First is self-doubt; one could make the case that “those charged with maintaining the system” -- primarily the U.S. -- now question the values serving as the foundation of the order. The 2016 presidential election underscored how many Americans resent what they view as the excesses of globalization and, explicitly or implicitly, question the applicability of their political arrangements to other systems. Moreover, the positions articulated by President Donald Trump suggest that he is the first American president since World War II who sees the costs and responsibilities of underwriting the global order as greater than the benefits that accrue to the U.S..
The second challenge -- also clear in today’s world -- is when the international order struggles to accommodate significant changes in relations between major powers. China’s relationship to the current world order is particularly problematic. While perhaps no single country has benefited more from the economic structures in place over the last 70 years, China rejects the political constructs that often accompany them. Moreover, China had little say in the development of the rules of this order, given its preoccupation with its own civil war after World War II -- the time of “the creation,” in the words of Secretary of State Dean Acheson. Now, as a global power, Beijing is skeptical about both the legitimacy of these rules and their applicability to China and much of the world. At a minimum, China desires a greater say in how the system works, precipitating the need for the international order to adapt to new realities, or to crater under their pressure.
Scholars and policymakers feverishly debate whether it is possible for the U.S. and its allies to maintain the current system under this strain. Doing so is very much in the interest of the U.S. America has been the country most invested in this international order, and the spread of its advantages to others. But the order has also been the vehicle through which America has been able to influence and shape the world to its benefit. Its stewardship of the system -- with its international norms and behaviors -- is the ultimate soft power vehicle.
While the fate of the international order is unlikely to be resolved anytime soon, there is some good news for America and others who share its interest in maintaining it. The tremendous boom in energy production that has taken the U.S. -- and global energy markets -- by storm in the last several years actually helps America with the challenge of adapting the international order, while still preserving it in several ways.
First, the new energy abundance reinforces one of the mainstays of the international order: well-functioning markets. The new energy landscape is transforming -- and will continue to transform -- the nature of natural gas markets from being segregated, rigid, politicized and in many ways inefficient to being more integrated, fluid and better able to allocate resources in a predictable manner.
In addition, the energy boom has increased the confidence of critical players, most notably China, in the market. When energy was perceived as scarce, there was a trend of growing reliance on non-market measures to secure energy needs. Given these doubts about the sufficiency of global energy supplies, China therefore pursued a wide range of deals -- from equity investments to secure ownership of energy resources in other continents to bilateral arrangements in which oil was sold outside the market -- to ensure access to this most strategic of commodities. The new energy abundance has changed China’s approach. It is now more comfortable relying on the markets, which are the core of the liberal economic order, to meet its energy needs.
The new energy abundance also diminishes certain challenges to the international order that have persisted since the turn of the century. For instance, Beijing’s strategy of acquiring oil and gas resources in Africa and Latin America -- intentionally or not -- led China to support its own gallery of rogues; it cultivated relationships with governments acting decidedly outside the norms of the international order. In protecting regimes from Venezuela to Zimbabwe, China created space for governments that flouted international norms to exist and prosper. Now, in the face of the new energy abundance, China may see less need to pursue resources in this manner and at these costs, potentially removing or minimizing a persistent irritant to the international order. More obviously, an era of low prices will weaken regimes for which oil and gas revenue are a lifeblood; from Russia to Venezuela to Iran, many of these countries are the most frequent challengers to the international order.
Finally, the new energy abundance offers the U.S. and others more breathing room to conduct the reform of global energy governance structures that is required to meet new realities. In February 1974, with the world still reeling from the Arab oil embargo, Kissinger convened an energy conference in Washington, D.C. The goal was to establish some sort of institutional framework to galvanize cooperation among energy-consumingcountries. A new institution -- the International Energy Agency -- did emerge over the course of the year following the conference. The new Paris-based body was constructed under the auspices of the Organization for Economic Cooperation and Development, an organization established in 1961 to promote markets and economic development among politically like-minded countries. By its charter, all members of the OECD -- and therefore the IEA -- must be led by democratic governments with a commitment to market economies. For many years after the establishment of the IEA, this subset of countries coincided nicely with the large energy- and oil-consuming countries of the world.
In the past 15 years, however, non-OECD countries have developed growing and -- in the case of China -- massive interests in global energy governance. In 2012, China began to clamor for new global energy governance institutions. It was not simply pushing back on the dominant role of the IEA, but also lamenting the large number of non-inclusive, fragmented and uncoordinated international institutions addressing energy governance. Most recently, China has focused on the G-20 as a potential vehicle for establishing greater international cooperation on energy issues. Xi has reportedly said privately, and bluntly, that if China is to be part of the international energy order, it must have influence over how it is run.
The West and its institutions were slow to respond to China’s explicit calls for new international structures to manage global energy issues. However, a development in late 2014 lit a proverbial fire under those who had been nodding passively at China’s exhortation for new institutions or the reform of old ones. On Oct. 24, 2014, China and representatives from 21 other countries signed a charter for the establishment of the Asian Infrastructure Investment Bank. The Obama administration and others in the U.S. saw this move as a direct challenge by China to the Bretton Woods system that established the World Bank and the International Monetary Fund to help with the development of infrastructure and other projects. While some believe that China would have propelled the AIIB forward under any circumstances, others saw the move as a direct result of the sluggish pace at which the Bretton Woods institutions were willing to grant China greater influence in them, given that its economy has grown more than twenty-fold since their establishment in 1944.
U.S. and other officials were suddenly nervous that if Beijing’s persistent entreaties for reform of global energy governance were not addressed, China would launch its own parallel set of energy institutions, directly challenging yet another element of the existing international order. The combination of these anxieties, and recognition of the need to create more inclusive, coordinated structures, stoked a significant effort on the part of the IEA to bring China and other large energy consumers into the fold. Upon taking the helm of the IEA in September 2015, executive director Fatih Birol made Beijing the destination of his first official trip. There, he explained that strengthening ties between the IEA and emerging powers would be a key objective of his tenure. “China,” he told an audience at the Chinese Academy of Sciences, “is at the very top of this list.” In the months that followed, the IEA opened a joint energy center in Beijing. China and other Asian countries also activated an “association status,” granting them access to a wide variety of data, training, and discussions at the IEA.
Will such steps be sufficient to keep China -- and potentially others -- in the tent of existing international energy institutions and from creating competing institutions? That remains to be seen, but there is no question that agreeing to principles and terms of reference for new or existing structures will be less contentious in an environment of abundance than in one of scarcity and competition. Moreover, many of the steps that might be required of aspiring members or associates -- such as the obligation of creating a strategic oil stockpile equal to 90 days of the country’s consumption -- are more easily done when prices are relatively low, rather than sky-high.
There will be many factors that ultimately determine whether the next decades unfold under the familiar contours of the international order that has persisted since World War II -- or if this period is one of massive disruption and the growing dominance of new institutions and norms. Energy is but one factor in shaping the outcome. But it is a powerful one, and an often underappreciated one. And perhaps most importantly, it is a factor over which U.S. policymakers have some influence. They need to appreciate the broad strategic value of the energy boom originating within America’s borders and seek to leverage it to sustain other sources of U.S. power and influence.
