The Chinese Resource Quest: How Current Events Sway China

The Motley Fool's energy bureau chief, Joel South, spoke with Michael Levi about his new book, By All Means Necessary: How China's Resource Quest Is Changing the World, coauthored with Elizabeth Economy. As the David M. Rubenstein senior fellow for energy and the environment at the Council on Foreign Relations, Levi is no stranger to the impact that countries and their decisions have on the rest of the world. In fact, Levi also writes a blog for the CFR, Energy, Security, and Climate, where he discusses the relationship between energy, the world, and its inhabitants. In By All Means Necessary, Levi analyzes the impacts and effects China's resource hunt has on the world and international affairs, specifically looking at the synthesis of economics, security, and politics.

In the seventh part of this 10-part interview, Joel South asks Michael Levi if the recent sanctions on Russia will play a role in China's future relations with the country. Levi responds by focusing on how China will view Russia within the economic and social repercussions of sanctions. Furthermore, Levi notes what might hold China back from involving itself with Russia.

A transcript follows the video.

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Joel South: Next I want to look at some of the sanctions -- a lot of Western sanctions. When we were looking at Iran for a while, China stayed away. They don't want to burn any bridges in future places that they could possibly put investment, and I was curious on how you might see the relationship with China and Russia, with Western sanctions picking up there.

Michael Levi: That's a very good question.

The trade relationship with Russia is almost certainly going to be affected by what's happening between Russia and Ukraine and Europe right now. Just like the Europeans want alternative sources of supply, the Russians want alternative sources of demand.

Their increased desire to get exposure to other markets as a result of what's happening with Europe -- and China's likely greater confidence in dealing with Russia because they see Russia as being in a relatively weak spot right now -- probably means that they'll be more able to do some sort of deal on a natural gas trade.

On direct investment into Russia, what you'll see is something you see repeatedly around the world. Chinese companies may or may not want to step in and take over where Western [unclear] have been, but either way they typically don't have the capital capacity to do it.

The reason that Russia brings in BP (NYSE: BP  ) or [ExxonMobil] (NYSE: XOM  ) is not because they love giving away their resources and having others invest, or because they're great enthusiasts for free markets and open investment. It's typically because they don't have the technical capacity, themselves -- and sometimes the capital, but particularly the technical capacity -- to exploit these technically challenging resources.

The Chinese companies just aren't yet capable of matching the Western ones in playing that role.

South: Okay, that's interesting. So, you would imagine, looking at past sanctions, that they will probably want to sit this one out and not really get involved too much, and if the technology comes about they ...

Levi: Yes. That's a long time off.


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