The Price of Asia’s Growth

As the Bush administration struggles to combat the threat of international terrorism, a far quieter force is challenging America’s global influence: the growing economic clout of Asia.

Increasingly, other nations have become captivated by the reality, and the potential, of fast-developing commercial ties with the East. Suddenly, America is no longer the only guarantor of their economic viability or their political protector of choice.

One high-stakes example is unfolding at the International Atomic Energy Agency in Vienna. There, diplomats say, U.S.-backed efforts to pressure Iran to give up its suspected pursuit of nuclear weapons have been complicated by Tehran’s growing recognition of China, India and Japan as the key future markets for its oil and natural gas.

China already gets 14% of its oil from Iran and last year made a long-term energy deal with the Islamic Republic worth tens of billions of dollars. Beijing has threatened to use its U.N. Security Council veto if necessary to protect Iran against U.S. efforts to impose sanctions.

Although Tehran can’t afford to ignore the West, “it has significant pulls to the East,” noted a diplomat close to the Vienna talks who spoke on condition of anonymity.

Iran is hardly an isolated case.

In Kazakhstan and elsewhere in Central Asia, U.S. efforts to promote democratic reform have been blunted in part by the reality that America is no longer the only major buffer against Russia.

Beijing has also become a player in the region. Once considered the stuff of fantasy, a vast pipeline running thousands of miles east to China from the rich Kazakh oil fields in the northern Caspian is under construction.

In South Korea, China has replaced the U.S. as Seoul’s largest trading partner and its biggest foreign destination for capital investment.

During six-nation talks to persuade North Korea to abandon its nuclear ambitions, South Korea has consistently lined up closer to positions set out by Beijing than by its alliance partner, Washington.

“As countries examine what their real interests are, the whole terms of reference are changing,” said Nicholas Lardy, an Asia specialist at the Institute for International Economics in Washington.

“It’s very much a problem,” said Rep. Tom Lantos of Burlingame, the senior Democrat on the House International Relations Committee.

After backing a landmark agreement between the U.S. and India on peaceful nuclear cooperation in July, Lantos found himself two months later trying to cajole India to join American efforts to take a tough line against Iran’s nuclear ambitions.

One key reason for New Delhi’s hesitation: It is deep in discussions with Tehran about a multibillion-dollar natural-gas pipeline deal that would help supply energy that India needs to fuel its burgeoning economy.

India eventually sided with the United States in an IAEA board vote condemning Iran’s nuclear activities, but the battle for New Delhi’s allegiance seems far from over.

Shortly after returning from Washington, Indian Prime Minister Manmohan Singh defended the talks with Iran, telling reporters in New Delhi: “We have a right to diversify sources of imports. And as far as the pipeline is concerned, that’s a decision between us and Iran.”

Lantos and an array of independent foreign affairs specialists argue that one key to countering Asia’s challenge is more active Bush administration engagement at the highest levels, especially in Asia.

Some critics pointed to President Bush’s decision to postpone Chinese President Hu Jintao’s visit to Washington in September because of Hurricane Katrina, and Secretary of State Condoleezza Rice’s decision to go to Africa rather than attend an Assn. of Southeast Asian Nations regional forum in July, saying the moves sent precisely the wrong signals to the region.

They also warned that the administration’s tight focus on the international terrorism threat at the expense of trade and development issues had often proved counterproductive.

“The game is on,” said Randall G. Schriver, former U.S. deputy assistant secretary of State for East Asian and Pacific affairs, who now works for Armitage International, an Arlington, Va.-based political and business consultancy.

“You don’t beat the Chinese by telling them to cease and desist. You beat them by having better policies.”

Administration officials reject the accusation about the lack of high-level contact, noting Singh’s White House visit in July, Hu’s meeting with Bush on the fringes of the United Nations General Assembly in New York in September and the U.S. leader’s planned trip this month to Japan, South Korea, China and Mongolia.

The administration officials also note that Defense Secretary Donald H. Rumsfeld and Treasury Secretary John Snow visited China last month and that three other Cabinet-level officials, including Rice, are scheduled to cross the Pacific this month.

“The contacts are going at a pace that’s going to burn out our staff,” said one senior administration official, who was not authorized to speak on the record.

In addition to these contacts, the administration has also launched broader dialogues with China and India.

Whatever the U.S. policy response, experts agree that the Asian challenge will only strengthen in the years ahead. Most projections of global economic growth forecast that Asia will continue to expand faster than other regions.

For many, it was a sign of the future that Singapore in June played host to the first Asia-Middle East Dialogue to explore how best to expand the budding relationship between the world’s key energy-supplier countries and its big-ticket consumers of the future.

“This is not just about oil or energy, but also about trade, investment, business, security, tourism and services,” said Singapore’s senior minister, Goh Chok Tong.

China’s oil needs are expected to more than double over the next two decades to just over 14 million barrels per day, according to U.S. Energy Information Administration projections -- roughly two-thirds of current U.S. consumption.

Meanwhile, economists believe India is likely to continue an expansion pace that saw total trade grow by more than 20% over the last two years and at an annual rate of 25.6% during the first 10 months of the fiscal year that ended in April.

By comparison, U.S. trade grew at less than half that pace.

To meet its demand, China has coupled diplomatic offensives with offers to buy equity stakes in oil and gas fields in such energy-rich nations as Sudan and Iran -- countries whose leaders are at odds with the Bush administration and happy not to be pressed on issues such as human rights.

With India a likely candidate to join China as a permanent member of any enlarged United Nations Security Council, Asia’s diplomatic clout is only expected to grow, according to those who follow events in the region.

“If you look at the potential makeup of the Security Council and the population growth as well as the economic growth centers, I don’t see how you can get away from the theory that the center of the world is moving east,” said Frank Verrastro, an energy specialist at the Center for Strategic and International Studies in Washington and a former White House advisor.

Those in the region concur.

“If we don’t go mad and start to fight each other,” Singaporean Foreign Minister George Yeo Yong Boon said in a recent interview, “then I believe the center of gravity of world civilization will shift to Asia during this century.”

Times staff writer Alissa J. Rubin in Vienna contributed to this report.