Malaysia, Indonesia and Saudi Arabia Move to Secure Oil Supply to China

May 30, 2007 (LPAC)--In a major development at the ongoing World Islamic Economic Forum in Kuala Lumpur, three separate companies, representing Malaysia, Indonesia, and Saudi Arabia, have signed an agreement to build a US$7 billion pipeline that would bring oil from Malaysia's northwest coastal town of Kedah to Malaysia's east coast, from where it would be distributed to East Asia, including China. Oil from the Middle East will be refined at Kedah, where a number of oil refineries will be set up. The pipeline work will begin in July, 2007.

This development is significant, because the oil from the Middle East to East Asia passes through the Malacca Strait, a highly overcrowded, narrow waterway situated between south of the Malaysian Peninsula and the Indonesian island of Sumatra. The growth in movement of container ships and oil tankers has virtually jammed up the waterway, threatening both the local environment and the regular flow of goods and oil into, and out of, East Asian nations.

Secondly, Malacca Strait has been used by the British colonials in the past as the choke point to punish nations by putting up a naval blockade. There were indications that in light of a rapid growth of China's economy and military in recent years, a section within the Bush administration and the Blair government in Britain, were contemplating keeping the option of blockading the Malacca Strait as a potential threat to China. On the other hand, Saudi Arabia, in particular, was keen in diversifying its oil supply, and strongly welcomed increasing consumption of the Middle East oil by China, among other nations in Asia.