China is asked to join energy group

IEA invitation is bid by U.S. to include developing nations

BY SHAI OSTER
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 such as the IEA, currently made up largely of the world's richest nations, could become less relevant.

It also comes at time of increased concern over China's energy policy in Africa and Central Asia and how it plans to use its own growing fuel stockpiles as more analysts predict 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 omcials 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 comes into play on issues such as international aid and in global talks on topics such as global warming, where it is held to a lower standard that rich countries.

U.S. officials said the LEA's charter could be rewritten 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 persuade the world's biggest producers to pump more crude.

China is still predominantly dependent on coal. Tuesday, the government warned that coal stockpiles had fallen below warning levels in several regions, including central China's Hebei, Anhui and Hunan provinces, as well as Beijing and northern China's Inner Mongolia. This winter, China had devastating blackouts after winter storms hit while stockpiles were low. Power companies are reluctant to buy fuel because while coal prices are rising, the government has capped the prices at which electricity can be sold.

Since it was founded, the lEA 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 be released only in consultation with the other member nations.

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

The reserveswould serve as an insurance cushion for China in case of a major supply disruption. State oil firms are managing the tanks, prompting some to worry that China would use the oil to manipulate markets in its favor. If it joined the lEA, China would pledge to follow international norms and coordinate any release with other members.