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ExxonMobil chief executive Rex Tillerson (left) and Russian President Vladimir Putin (right) attend a signing ceremony in Tuapse, Russia, in June 2012 for an agreement between Rosneft and ExxonMobil to jointly develop reserves in western Siberia. Photo: EPA/Mikhail Klimentyev/RIA Novosti

‘More known unknowns ahead’ for Sino-US ties with Tillerson as Trump’s top diplomat

Nominee developed deal-making skills as head of world’s biggest oil and gas company

US president-elect Donald Trump’s nomination of Rex Tillerson, the head of the world’s largest oil and gas company, as his secretary of state could make the complex Sino-US relationship more unpredictable due to Tillerson’s lack of diplomatic experience, observers say.

They view the ExxonMobil chief executive’s nomination as further evidence that Trump, who has no government experience himself, intends to shake up America’s foreign policy.

Zhiqun Zhu, director of the China Institute at Bucknell University, Pennsylvania, said Trump tended to view everything from a business perspective, believed everything could be negotiated, and seemed bent on radically changing US foreign policy.

“We are entering uncharted territory and one wonders whether a business negotiator can really handle complex political and diplomatic issues,” he said.

Steve Tsang, director of the London-based SOAS China Institute, said Tillerson would be in office solely due to Trump’s patronage and would carry no baggage from government service, such as allegiance to the decades-old one-China policy.

US president-elect Donald Trump arrives at his post-election party at the New York Hilton Midtown on November 8. Photo: AFP

“He is likely to be Trump’s man fully in dealing with Beijing and this makes what he may do unpredictable,” he said. “Tillerson adds to the uncertainties in US-China relations, which is unlikely to be welcomed in Beijing, which prefers predictability and a clear reiteration of US commitment to the one-China policy.

“Beijing is unlikely to get that from Rex Tillerson – at least not for the immediate future.”

Trump’s phone conversation with Taiwanese President Tsai Ing-wen early this month and his recent remarks challenging the one-China policy have upset the uneasy equilibrium in the trilateral relationship between Washington, Beijing and Taipei.

Zhu said: “Since Trump picked a green hand to serve as the top diplomat and he is surrounded by some hawkish advisers such as John Bolton, who is rumoured to be his choice as deputy secretary of state, one can predict a very rough and more muscular US foreign policy in the years ahead.”

Although Tillerson has no previous government experience, the management and deal-making skills he honed in his four decades at ExxonMobil reportedly impressed Trump. Forbes magazine has listed Tillerson among the world’s 25 most powerful people for the past two years.

Taiwanese President Tsai Ing-wen speaks on the phone with US president-elect Donald Trump at her office in Taipei on December 2. Photo: Reuters/Taiwan Presidential Office/Handout

Trump has praised Tillerson as “a strong man, a tough man” and “one of the greatest and most skilled global business leaders of our time”. The US president-elect also remarked that his nominee as America’s top diplomat was friendly with some hostile world leaders that the US did not get along with, notably Russian President Vladimir Putin.

“I do not think Trump’s pick of Tillerson has much to do with China,” Zhu said. “Given Trump’s admiration of [strongman leaders such as] Putin and his intention to change US foreign policy, the choice makes sense.”

But analysts said that even if Washington and Moscow moved closer, it did not necessarily mean China would become America’s key adversary, mostly due to the close strategic ties between Russia and China.

“The days are long gone when two of the three giants could team up against the third one,” Zhu said. “Deep interdependence and divergent national interests guarantee a relationship that is both cooperative and competitive between any two of the big powers.”

Han Xiaoping, the chief executive of energy news portal China5e.com, said that while Trump might want to join hands with Russia to contain China, it was almost impossible for such a scenario to eventuate.

“Almost all US presidents may share a dream to keep China in check by working with Russia,” he said. “But, on the contrary, it has strained ties with Russia.”

ExxonMobil chief executive Rex Tillerson delivers a speech on oil drilling in the Arctic in Washington in March 2015. Photo: AP

Han said both Russia and the US, which had become energy self-reliant because of the shale gas boom, needed the Chinese market, and that made them competitors rather than collaborators.

“It is also worth noting that the scheme to contain China is unlikely to make any headway because Russia will not change its deep-rooted distrust of the US simply because of one appointment,” he added, referring to Tillerson.

Both Han and Xiamen University energy policy specialist Lin Boqiang said Tillerson’s appointment would be bad news for the development of renewable energy around the world.

“It shows Trump favours conventional energy sources, which would be encouraging for fossil fuel companies who have been struggling in their competition with renewable and unconventional energy companies over the years,” Lin said. “With an oil company executive heading the State Department, the fossil fuel industry will make a comeback and become more competitive.”

Observers said ExxonMobil had extensive business interests in China, and that Tillerson was known in China for having a good working relationship with its state-owned oil companies.

ExxonMobil’s website says its history in China dates back to the 1890s, when its predecessor, Standard Oil, became a household name by selling millions of small tin kerosene lamps, known as Mei Foo.

Since re-entering the Chinese market in the late 1970s, after the Cultural Revolution, the company has developed significant operations in China, including gas and fuel marketing, lubricants sales and services, chemical production and power generation. It owns a 25 per cent stake in a US$4.5 billion refining and petrochemical complex in Fujian province developed with partners Sinopec and Saudi Aramco, and operates approximately 750 service stations and a network of terminals in the province.

A Chinese coast guard vessel passes near the Chinese oil rig Haiyang Shi You 981 in the South China Sea, about 210km from the Vietnamese coast, in June 2014. Photo: Reuters

But the 67,000 barrels per day of annual crude oil processing capacity attributable to ExxonMobil is just a drop compared to its total global refining capacity of 5.04 million barrels per day at the end of last year.

And despite operating in China for decades, ExxonMobil and other foreign oil majors like BP and Shell have made little progress in attempts to break up the de facto monopoly of China’s three state-owned oil companies and unlock the lucrative upstream exploration and production sector.

Instead, ExxonMobil has been quite successful in working with China’s Southeast Asian neighbours to tap into massive offshore oil and gas reserves in the South China Sea.

Mobil, which merged with Exxon in 1999 to become ExxonMobil, was one of the first international oil companies to embark on exploration in the Spratly Islands in the 1970s.

Unlike other Western oil majors, which have usually taken a wait-and-see approach when drilling in the disputed waters, ExxonMobil appeared unfazed by the political uncertainty in the region and maintained extensive business links with almost every Southeast Asian country.

Leaked US State Department cables revealed China began to warn oil majors against conducting oil exploration activities in the disputed South China Sea in 2006, the year Tillerson became ExxonMobil’s chairman and chief executive.

While BP and Chevron cancelled operations and ConocoPhillips divested its interests in South China Sea blocks due to growing pressure from Beijing, ExxonMobil, with a relatively smaller stake in China, continued exploration with PetroVietnam, according to the International Crisis Group, an NGO based in Brussels.

In 2014, ExxonMobil became embroiled in a diplomatic standoff between Beijing and Hanoi when China deployed a deep-water oil rig in disputed waters near one of the gas blocks the US oil giant was drilling off central Vietnam.

China claims sovereignty over 80 per cent of the South China Sea, but ExxonMobil and Vietnam insisted the blocks, where major discoveries of hydrocarbon were made, were in undisputed areas.

Relations between Beijing and Hanoi have yet to recover from the 2014 crisis, but the impact on ExxonMobil’s business interests in China is not known.

This article appeared in the South China Morning Post print edition as: New known unknowns ahead with Tillerson
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