The Indo-Pacific region has become the energy artery of global energy trading, connecting East and West.
With a shift to the East Asian region, the Indo-Pacific region is becoming the center of maritime trade and midstream oil business.
1. China’s rise and the global energy trade in the Indian-Pacific region
The rise of China has astonished the western world. After centuries of continuous industrial growth in the West, there has been a shift of industrial activities to the East. There was plenty of economic activity in the East Asian region before. We have seen breathtaking growth rates that have shaped the Japanese economy and the Asian tigers.
We are witnessing the industrialization of countries like South Korea and Singapore. The Asian Tigers were in many ways an indicator of the future. They were the first step towards a new economic paradigm. This means a shift in trade structures. In many ways, the new trade networks that are forming throughout the Indo-Pacific region eerily remind the attentive observer of the old Silk Road that already existed.
It is no coincidence that China has chosen the Silk Road as the overarching strategic paradigm of its rise. For some, the new Silk Road represents an arc of prosperity, for others a hub of interconnectivity. By and large, it represents an option for China. Optionality in the sense that China can choose from various options to make strategic commitments to other countries and regions.
2. The maritime Silk Road: A vision for our energy future
Although the new Silk Road initially began as a land bridge to neighboring countries, it quickly expanded its ambitions beyond the near abroad to the steps of the Eurasian supercontinent. The new Silk Road became more and more ambitious and all-encompassing in its vision. China strategically adopted the new Silk Road as a central axis linking East and West as a whole ecosystem. The most important contribution of the West in historical terms seems to have been the communication between different countries and their people. It forms the core of the West’s identity and self-image, which is defined by its expansion. For the West, the focus is on the expanding area, the infinite space, as Oswald Spengler would put it.
For outsiders, China’s contribution may lie in the physical, material realm, which connects distant, far-flung points on the map through infrastructure. Through infrastructure, electric power and steam, China connects the wide world of Eurasia with the heartland. This is very much in line with what Halford John Mackinder referred to in his Heartland Theory. All of these infrastructure buildings are part of a larger, ground-based project with the express goal of spreading connections by sea, land and air.
If you look at the general direction of things, the land bridge being built from China to the European continent is already well advanced. China is still juggling the construction of the maritime Silk Road, but is growing as an infrastructure builder in this process. This juggling seems to refer in part to Chinese history. China is not a traditional maritime power like the British were and the Americans are.
In its long history, China has maintained extensive trade with other nations. This included sea trade with Southeast Asian countries and regions. China’s main focus has always been the stabilization of its own territory.
3. The Indo-Pacific energy trade is mercantalistic. The sea is the central element of the region.
China has focused on agricultural production for most of its history. Whole periods of Chinese history were shaped by China’s domestic political orientation. The volume and breath of maritime trade was also the result of China’s global importance, not just trade with foreign nations. China’s importance in East Asia acted as a magnet for trade in the Indo-Pacific region. However, foreign trade became more difficult in interior of the Chinese heartland.
But the Indian-Pacific region has primarily a maritime character. In this area there are a multitude of nations that trade in its area. It is quite similar to the Hanseatic League of Northern Europe. This area is dynamic, shape-changing, with changing dimensions. This space expands and contracts according to the economic needs of the time in which we find ourselves. In this geographical space, energy is transformed into economic performance.
The mere fact that China is sufficient in itself may be evidence that very different trading centers have established themselves as points of contact between East and West. The Indo-Pacific is an area that lives out its mercantile nature in order to increase its prosperity.
4. Singapore as a central hub for Indo-Pacific energy trading
First of all we can think of Singapore. Singapore is striving for a commercial, all-encompassing energy policy. The size of Singapore plays an important role in this. Small states do not have the luxury of sitting idly by or retreating to the domestic market. Their existence depends on trade and the commercial goodwill of others.
These nations and city-states in the Indo-Pacific region are dependent on resources they receive from abroad. They receive at least some of the resources from far corners of the world. Without them, they cannot function at the highest levels of industry and commerce. Without trade they expose themselves. The prosperity of modern city-states is based on free trade, safe sea routes and pleasant neighbors. Singapore was not a bustling center of commercial activity in the 17th century.
Only with globalization and worldwide industrialization did Singapore become a more important player in international trade. The rise of the Asian tigers alone could not fill Singapore’s growing commercial apetide for more trade and connections to the world.
We see that a shift in global communications led to the industrialization of city states in the international trading system. They now have the opportunity to become important players if they are well positioned in existing trading networks, as is the case with Singapore. So it could also be the case that China, with all its massive civil engineering projects, will awaken the rise of city states.
5. The Hanseatic League: In a way a role model for the Indian-Pacific region and global energy trading
To understand what it is that makes city-states so successful, we need to go back in history to a different time and place. In a sense, the Hanseatic League is a forerunner of the Indian-Pacific region. But what makes city-states so successful in trade zones like the Hanseatic League? And what makes city states so successful? Does the Hanseatic League have certain similarities to the Indian-Pacific region?
The Hanseatic League was a trade association of cities that existed long before the new Indo-Pacific trade and economic area. It connected regions along the Baltic and North Seas, which shared a common ideal for trade and commerce and exchanged goods with each other.
Each trading port was connected to the larger trading network, which reduced costs and shortened the time to get to other places. As a result, transaction costs were also reduced and the profits that the traders made from their trade could be reinvested in the economy. It became a virtous cycle, and the prosperity of the participating cities grew immensely.
We are seeing the first signs of a more integrated Indo-Pacific trade network similar to what we saw with the Hanseatic League in the Baltic region. Energy is the foundation of this new trading network. Energy trading forms the backbone of this extensive new trading network.
Rushing ocean currents wash around the Indonesian archipelago from east and west. Between Malaysia and Indonesia lies Singapore, an island at the center of maritime trade. Here different worlds meet. We are at the heart of the world’s major energy trading movements. In Singapore, business relationships are established, and you can feel the mercantile pulse of the Indian-Pacific region.
The Pacific region has established itself as the main artery of world energy trade. Energy history shows us that the Indo-Pacific region will rise again as part of the restored Silk Road. History teaches us that other trading networks, such as the Hanseatic League, have been successful over the centuries in bringing prosperity to the region where they live. The Hanseatic League was driven by small ships that crossed the Baltic Sea. In the case of the Indo-Pacific, the deep-sea ships needed one thing above all else to reach the heights of trade: ENERGY.
Many thanks for the shared interest in the energy world!