.png)
.jpg)
The almost certain existence of a corruption investigation of former Politburo Standing Committee member Zhou Yongkang could portend larger changes ahead for China's oil industry and internal security system. After months of speculation, a collection of reports in international mainstream media citing a wide range of high-level sources has confirmed that President Xi Jinping authorized an official inquiry into Zhou's alleged disciplinary infractions sometime in early December. This follows Xi's move in October to establish a separate disciplinary organ reporting directly to himself.
Zhou is perhaps the ultimate "tiger" in Xi's ongoing campaign to root out bureaucratic corruption at both the highest and lowest levels (the "tigers" and "flies"). Zhou served as China's chief of internal security under President Hu Jintao and sits atop a powerful patronage network with close ties to the oil industry and Sichuan Basin region. He is the highest-ranking official to have been subject to a corruption investigation since the founding of the People's Republic in 1949 (though he is certainly not the first to be purged in a power struggle). He is also an official who, in the course of a long career, held sway over two pillars of Communist Party power: oil and the police.
Zhou is unlikely to escape the charges. The same is true of many of his former associates and proteges from the energy sector, particularly China National Petroleum Corp., as well as from the Chongqing and Sichuan provincial governments. (Zhou first rose to prominence in China National Petroleum Corp., which he chaired in the late 1990s.)
The fates of Zhou and his colleagues are significant. Many of the officials implicated in the investigation were powerful Party leaders themselves, each the head of their own extensive patronage networks that collectively reached well beyond Zhou and his relations. Even before an inquiry had been launched against Zhou, investigations of figures such as Jiang Jiemin, who also chaired China National Petroleum Corp. and later briefly served as the top regulator for China's entire state-owned sector, were enough to draw widespread international attention and raise concerns over potential implications for policymakers.
Likewise, whether the corruption investigation now underway eventually materializes in formal corruption charges also carries significance. The trajectory of the investigation into Zhou will serve as an important test of Xi's commitment to rooting out corruption -- or of his ability to consolidate his own and the current Politburo Standing Committee's influence within the government.
But ultimately, what happens to Zhou personally is subordinate to another concern: the impact of Zhou's investigation, and by extension the crackdown on Zhou's patronage networks, on Chinese government policy. Going forward, two key realms -- energy and internal security -- should be watched most closely. Any policy implications from Zhou's investigation will likely be concentrated in either or both of these sectors and with the most potentially far-reaching implications -- not only because they represent the core of Zhou's influence, but also and more critically because they are central to maintaining social, economic and political stability. Maintaining this stability -- through both more effective, centrally coordinated energy policy and internal security -- will be particularly important in the coming years as China's leaders look to implement deeper social and economic reforms.
Already, important shifts are underway in China's internal security system. During a November 2012 Party Congress, the status of the internal security bureau was quietly downgraded -- after having been elevated under Zhou. Moreover, Zhou's successor as chief of internal security, Meng Jianzhu, has retained his position in the Politburo rather than be promoted to the all-powerful Politburo Standing Committee, a not altogether unusual move, though notable given the crackdown on Zhou.
The reasons for lowering the formal status of the internal security bureau are likely complex, but ultimately the move was designed to signal the Party's unease with the influence it -- and by extension Zhou -- had come to wield between 2007 and 2012. Notably, during the November Third Plenum meetings, Xi announced the launch of a new National Security Council, modeled after the United States', that would more seamlessly integrate high-level command of both internal and external security under his own command. Stratfor expects Xi's grip on internal security to grow.
Likewise, investigations into Jiang and other officials with ties to China National Petroleum Corp. have provoked widespread discussion, both within and outside the government, over the future of Chinese energy policy. Thus far, there have been no significant shifts in the domestic or international behavior of the company or China's other major state-owned energy firms. But 2013 offered ample evidence that changes to the oil industry's structure and operations are imminent.
In particular, China's leaders have emphasized the need for more competition and openness to private -- including foreign -- investment in an oil and natural gas sector long dominated by the Big Three energy firms (China National Petroleum Corp., China National Offshore Oil Corp. and China Petroleum & Chemical Corp., also known as Sinopec). This is a policy goal that would likely run counter to the interests of many officials with close ties to a company such as China National Petroleum Corp., and it may well have precipitated the current investigations.
Some experts within the National Development and Reform Commission have gone so far as to recommend separating upstream, midstream and downstream activities altogether, or even subsuming control over China's pipeline system directly under the commission itself. While these proposals will almost certainly not be acted on, they reflect the range and nature of debate within the central government over China's energy sector. At its core, this debate reflects a simple but fundamental fact: As currently structured, China's energy sector has not been nearly efficient or effective enough at developing much-needed unconventional energy resources.
To view the investigation of Zhou through the prism of corruption alone potentially obscures a larger point. In China, as in most authoritarian regimes, ascending in politics necessarily entails building networks of patronage and influence that operate around and often counter to the interests of the state. These networks are not only paths to power; they also help protect officials from policy reorientations of the central government.
This fact makes such networks, especially when tied to powerful state apparatuses such as oil and internal security, potential obstacles to any leader looking to shift the direction of the national government -- as Xi is now doing. This is, in part, why Zhou had to be removed. It is also why the crackdown on Zhou could neither begin at the top nor proceed quickly, but rather has slowly trickled upward in the two years following Bo Xilai's much more sudden downfall.
At the same time, the approach to the investigation thus far raises questions about the future of the rule of law in China. The decision to launch a formal investigation of Zhou may be designed in part to signal that no official is above the law -- a significant message in a country that has struggled to establish effective rule of law in the past.
But so far, the crackdown on Zhou has proceeded along established Communist Party lines -- largely in secret and with little transparency. Given the nature of political power in China, this may be necessary. But the tactics taken by Xi's administration against Zhou raise deeper questions about whether and how China can make progress in establishing a more powerful and independent judiciary.
Courtesy : Stratfor (www.stratfor.com)