Treasure of Khan
Harvey opened the window shades, letting in a blast of sunlight that made everyone in the room squint for a moment.
"Jan, my desk trades in global equities," stated a short blond woman in a garnet-colored blouse. "Can you tell me which countries are most vulnerable to the reduced Saudi oil exports?"
"Sandra, I can only tell you where the Saudi oil exports are currently going. The U.S., as you know, has been a prime customer of Saudi oil since the 1930s. Washington has long pursued a goal of reducing our reliance on Middle East crude, but Saudi oil still accounts for nearly fifteen percent of our total imported oil."
"How about the European Union?"
"Western Europe obtains most of their oil from the North Sea, but Saudi imports do play a factor. Their proximity to other suppliers should mitigate severe shortages, I believe. No, the hardest-hit countries will be in Asia."
Clayton drained the last of her coffee while she pulled up a file on her computer. She curiously noted that the occupants of the entire room remained seated and listening to her every word.
"Japan will feel a major jolt," she said, scanning the report. "The Japanese import one hundred percent of their oil requirements and were already stung by the recent earthquake in Siberia that took out a section of the Taishet-Nakhodka pipeline. Though not widely publicized, that accident had already pushed the price of oil up three to four dollars a barrel," she noted. "I can tell you that Japan imports twenty-two percent of its oil from Saudi Arabia, so they will feel a significant contraction. However, a temporary boost in Russian oil exports could take away something of the strain once the Siberian pipeline is repaired."
"And China?" an anonymous voice asked. "What about that fire near Shanghai?"
Scanning down the page, Clayton furrowed her brow.
"The Chinese will be facing a similar shock. Nearly twenty percent of China's oil imports come from Saudi Arabia," she said, "all of which arrives by tanker ship. I haven't assessed the impact of the fire at the Ningpo oil terminal, but I can only speculate that combined with the Ras Tanura disaster, the Chinese will be facing a major hurdle in the near term."
"Are alternative sources available to the Chinese?" a voice in the back asked.
"Not readily. Russia would be the obvious source, but they are more inclined to sell their oil to the West and Japan. Kazakhstan might provide some relief, but their pipeline to China is already at capacity. I think there could be a dramatic impact to the Chinese economy, which is already suffering a shortage of energy resources." Clayton made a mental note to review the Chinese situation in more depth when she returned to her office.
"You mentioned domestic fuel shortages earlier," a pasty-faced man in a purple tie asked. "How severe will that be?"
"I would expect only temporary shortages in limited areas, assuming no other market impacts. Again, the main problem we are facing is fear. Fear of another supply disruption, either real or imagined, is the real culprit that could drive us to a complete meltdown."
The meeting wound down as the crowd of financiers glumly scurried back to their gray work cubicles. Clayton gathered her laptop and headed for the door as a figure drew up alongside her. Turning her head, she gazed with apprehension at the slovenly figure of Eli, a doughnut crumb on his tie.
"Great meeting, Jan." Eli grinned. "Can I buy you a cup of coffee?"
Gritting her teeth, all she could do was smile and nod.
-13-
IT WAS A STIFLING day in Beijing. A suffocating conflux of heat, smog, and humidity doused the congested city in a thick soup of misery. Tempers flared on the streets as cars and bicycles jostled for position in the jammed boulevards. Mothers grabbed their children and flocked to the city's numerous lakes in an attempt to seek a reprieve from the heat. Teenage street vendors hawking chilled Coca-Colas made stellar profits quenching the thirst of sweaty tourists and businessmen. The temperature was little cooler in the large meeting room of the Chinese Communist Party headquarters, situated in a secure compound just west of Beijing's historic Forbidden City. Buried in the basement of an ancient edifice inaptly named the Palace Steeped in Compassion, the windowless conference room was an odd conglomeration of fine carpets and antique tapestries mixed with cheap 1960s office furniture. A half dozen humorless men, comprising the elite Standing Committee of the Political Bureau, the most influential body in China's government, sat at a scarred round table with the general secretary and president of China, Qian Fei.
The stuffy room felt much hotter to the minister of commerce, a balding man with beady eyes named Shinzhe, who stood before the party chiefs with a young female assistant at his side.
"Shinzhe, the State just approved the five-year plan for economic progress last November," President Fei lectured in a belittling tone. "You mean to tell me that a few 'accidents' have rendered our national objectives unfeasible?"
Shinzhe cleared his throat while wiping a damp palm on his pant leg.
"Mr. General Secretary, politburo members," he replied, nodding to the other assembled bureaucrats. "The energy needs of China have changed tremendously in the last few years. Our rapid and dynamic economic growth has driven a high thirst for energy resources. Just a few short years ago, our country was a net exporter of crude oil. Today, more than half of our consumption is supplied by crude oil imports. It is a regrettable fact due to the size of our economy. Whether we like it or not, we are captive to the economic and political forces surrounding the foreign petroleum market, just as the Americans have been for the last four decades."
"Yes, we are well aware of our growing energy appetite," stated Fei. The recently elected party head was a youthful fifty-year-old who catered to the traditionalists in the bureaucratic system with equal parts charm and wile. He had a reputation for being hot-tempered, Shinzhe knew, but respected the truth.
"How severe is the shock?" another party member asked.
"It is like having two of our limbs cut off. The earthquake in Saudi Arabia will drastically restrict their ability to ship us oil for months to come, though we can develop alternate suppliers over time. The fire at Ningbo Harbor is perhaps more damaging. Nearly a third of our imported oil flows through the port facility there. The infrastructure necessary to receive oil imports by ship is not something that can be quickly replaced. I am afraid to report that we are facing immediate and drastic shortages that cannot be easily remedied."
"I have been told the damage repairs may take as long as a year before the current level of imports can be restored," a white-haired politburo member said.
"I cannot dispute the estimate," Shinzhe said, bowing his head.
Overhead, the room's fluorescent lights suddenly flashed off, while the noisy and mostly ineffective air-conditioning system fell silent. A stillness settled over the darkened room before the lights flickered back on and the cooling system slowly clanged back to life. Along with it came the temper of the president.
"These blackouts must stop!" he cursed. "Half of Shanghai was without power for five days. Our factories are operating limited hours to conserve electricity, while the workers have no power to cook their dinner at night. And now you tell us that we will be short of fuel oil from abroad and our five-year plan is rubbish? I demand to know what is being done to solve these problems," he hissed.
Shinzhe visibly shrunk before the tirade. Glancing around the table, he saw that none of the other committee members were brave enough to reply, so he took a deep breath and began speaking in a quiet tone.
"As you know, additional generators will go on line shortly at the Three Gorges Dam hydroelectric development, while a half dozen new coal- and gas-fired power plants are in various stages of construction. But obtaining sufficient natural gas and fuel oil supplies to operate the non-hydro power plants has been a problem, and is more so now. Our state-sponsored oil companies have stepped up exploration in the South China Sea, despite protests from the Vietnamese government. Furthermore, we continue to broaden supply relationships abroad. The foreign ministry has
recently completed successful negotiations to purchase significant quantities of fuel oil from Iran, I might remind the committee. And we are continuing efforts to acquire Western oil companies that own rich stocks of reserves."
"Minister Shinzhe is correct." The gray-haired foreign minister, who sat quietly to the side, coughed. "These activities address long-term sources of energy, however, and will do nothing to solve the immediate problem."
"Again, I ask, what is being done to address the shortfall?" Fei nearly shrieked, his voice rising an octave.
"In addition to Iran, we have spoken with several Middle Eastern countries about boosting their exports. We must of course compete with the Western countries on price," Shinzhe said softly. "But the Ningbo Harbor damage physically limits the amount of oil we are able to bring in by sea."
"What about the Russians?"
"They are in love with the Japanese," the foreign minister spat. "Our attempt to jointly develop a pipeline from the western Siberian oil fields was rejected by the Russians in favor of a line to the Pacific that will supply Japan. We can only boost rail shipments of oil from Russia in the short term, which, of course, is not a feasible means to transport any sizeable quantities."
"So there is no real solution," Fei grumbled, his anger still simmering. "Our economic growth will terminate, our gains against the West will cease, and we can all just return to our cooperative farms in the provinces, where we will enjoy continuing blackouts."
The room fell silent again as no one dared even breathe in the face of the general secretary's ire. Only the tinny rattle of the air-conditioning rumbling in the background stirred the heavy morose in the air. Then Shinzhe's assistant, a petite woman named Yee, cleared her throat.
"Excuse me, General Secretary, Minister Shinzhe," she said, nodding to the two men. "The State has just today received a peculiar offer of energy assistance through our ministry. I am sorry I didn't have the opportunity to brief you, Minister," she said to Shinzhe. "I didn't recognize the importance at the time."
"What is the proposal?" Fei asked.
"It is an offer from an entity in Mongolia to supply high-quality crude oil. . ."
"Mongolia?" Fei interrupted. "There's no oil in Mongolia."
"The offer is to supply one million barrels a day," Yee continued. "Delivery commencing within ninety days."
"That's preposterous," Shinzhe exclaimed, glaring at Yee with irritation for publicly sharing the communiqué.
"Perhaps," Fei replied, a look of intrigue suddenly warming his face. "It is worth investigating. What else does the proposal say?"
"Just the terms they demand in return," Yee replied, suddenly looking nervous. Pausing in hopes the discussion would end there, she sheepishly continued when she saw all eyes were fixed on her. "The price of the oil shall be set at the current market price and locked for a period of three years. In addition, exclusive use of the northeast oil pipeline terminating at the port of Qinhuangdao shall be granted, and, further, the Chinese-controlled lands denoted Inner Mongolia shall be formally ceded back to the ruling government of Mongolia."
The staid audience erupted in an uproar. Cries of outrage rocked through the room at the shocking demand. After minutes of boisterous dissent, Fei pounded an ashtray on the table to regain silence.
"Silence!" the president shouted, immediately quieting the crowd. A pained look crossed his face, then he spoke calmly and quietly. "Find out if the offer is real, if the oil does, in fact, exist. Then we shall worry about negotiating an appropriate price."
"As you wish, General Secretary," Shinzhe bowed.
"Tell me first, though. Who is it that is making this contemptuous demand?"
Shinzhe looked helplessly at Yee. "It is a small entity that is unknown to our ministry," she answered, addressing the president. "They are called the Avarga Oil Consortium."
-14-
THEY WERE HOPELESSLY LOST. Two weeks after departing Ulan-Ude with instructions to explore the upper Selenga River valley, the five-man seismic exploration team had lost its way. None of the men from the Russian oil company LUKOIL were from the region, which added to their misfortune. The trouble began when someone spilled a hot coffee on the GPS unit, drowning it in a quick death. It was not enough to halt their progression south, even when they stumbled across the Mongolian border and off the edge of the Siberian maps they carried for insurance. What kept them going was a series of subsurface folds detected from the pounding of the "thumper" truck that indicated possible structural traps. Structural traps in the sediment are natural collection basins where pockets of oil and gas can accumulate. The survey team had meandered southeast while tracking the deep traps that meant possible oil and completely lost track of the river. "All we have to do is head north and follow our tracks where they're visible," said a short, balding man named Dimitri. The team leader stood peering west, watching the long shadows cast by the trees as sunset approached.
"I knew we should have left a trail of bread crumbs," grinned a young assistant engineer named Vlad.
"I don't think we have enough fuel to reach Kyakhta," replied the thumper's driver. Like the vehicle itself, he was a big, burly man with thick limbs. He climbed into the open driver's door and stretched out on the bench seat for a catnap with his meaty hands tucked behind his head. The big thirty-ton rig carried a steel slab under its belly, which pounded the ground, sending seismic shocks deep into the earth. Small transceivers were placed various distances from the truck, which received the signals as they bounced off the subsurface sediment layers. Computerized processing converted the signals into visual maps and images of the ground below.
A dirty red four-wheel-drive truck pulled alongside and stopped, its two occupants jumping out to join the debate.
"We had no authorization to cross the border, and now we don't even know where the border is," complained the support truck's driver.
"The seismic readings justify our continued tracking," Dimitri replied. "Besides, we were ordered to take to the field for two weeks. We'll let the company bureaucrats worry about obtaining permission to drill. As for the border, we know it is somewhere north of us. Our immediate concern will be to acquire fuel in order to reach the border."
The driver was about to complain when a muffled boom in the distance diverted his attention.
"Up there, on the hill," Vlad said.
Above the rocky hill they stood on rose a small mountain range, which glimmered green from its pine-covered crags. A few miles distant, a puff of gray smoke drifted into the cloudless sky from a thick-wooded ridge. After the blast's echo receded from the hilltops, the sound of heavy machinery rumbled faintly down the slopes.
"What in the name of Mother Russia was that?" grumbled the truck's driver, awakened by the blast.
"An explosion up on the mountain," Dimitri replied. "Probably a mining operation."
"Nice to know we're not the only people in this wilderness," the driver muttered, then returned to his nap.
"Perhaps someone up there can tell us the way home," Vlad ventured.
An answer was short in the waiting. The hum of an engine drew closer until a late-model four-wheel drive appeared in the distance. The vehicle rounded a hill, then barreled across the open flats toward the surveyors. The car hardly slowed until it was nearly upon them, then stopped abruptly in a cloud of dust. The two occupants sat motionless for a moment, then exited the vehicle cautiously.
The Russians could tell immediately that the men were Mongolian, with their flat noses and high cheekbones. The shorter of the two stepped forward and barked harshly, "What are you doing here?"
"We're a bit off track," replied the unflappable Dimitri. "We somehow lost the road while surveying the valley. We need to get back across the border to Kyakhta, but we're not sure if we have enough fuel. Can you help us out?"
The Mongol's eyes grew larger at hearing the word "survey," and for the first time he carefully studied the thumper truck parked behind the men.
"You are conducting o
il exploration?" he asked in a calmer tone.
The engineer nodded yes.
"There is no oil here," the Mongol barked. Waving his arm around, he said, "You will bivouac here for the night. Stay in this spot. I will bring fuel for your truck in the morning and direct you toward Kyakhta."
Without a farewell or pleasantry, he turned and climbed into the car with his driver and roared back up the mountain.
"Our problems are solved," Dimitri said with satisfaction. "We'll set up camp here and get an early start in the morning. I only hope you have left us some vodka," he said, patting the shoulder of his sleepy truck driver.
• • • •
Darkness fell rapidly once the sun set over the hills, bringing with it a ripe chill to the night air. A fire was built in front of a large canvas tent, which the men crowded around while downing a tasteless dinner of canned stew and rice. It didn't take long for the nightly entertainment of cards and vodka to emerge, with cigarettes and pocket change ruling the pots. "Three hands straight." Dimitri laughed as he raked in the winnings from a hand of preference, a Russian card game similar to gin rummy. His eyes glistened under heavy lids, and a trickle of vodka dripped from his chin as he gloated to his equally inebriated coworkers.
"Keep it up and you'll have enough for a dacha on the Black Sea," one countered.
"Or a black dachshund on the Caspian Sea," said another and laughed.
"This game is too rich for my blood, I'm afraid," griped Vlad, noting he was down a hundred rubles for the night. "I'm off to my sleeping bag to forget about Dimitri's cheating ways."