China Uses Energy Leverage to Push Taiwan Toward Political Union
China has offered to provide Taiwan with stable and reliable energy supplies if the island agrees to a peaceful reunification. Beijing claims that Taiwan would have better protection for its energy and resource security under a “strong motherland,” including affordable, cleaner and more stable energy supplies.”We are willing to provide Taiwan compatriots with stable and reliable energy and resource security, so that they may live better lives,” Chen Binhua, spokesperson for China’s Taiwan Affairs Office, told reporters.
China continues to propose the “one country, two systems” model as a bargaining chip in a potential reunification with Taiwan, and is using the energy crisis triggered by the Middle East war to lure its smaller neighbor.
Will it work this time?
Taiwan has consistently rejected Beijing’s reunification proposals, maintaining that its future can only be determined by its own people, according to repeated statements from Taipei.
China, for its part, has not ruled out the use of force. President Xi Jinping has previously described reunification as an “unstoppable” process, while Chinese officials have warned they will take “all necessary measures” to counter what they call separatist activity and foreign interference.
In recent months, the Chinese military has carried out large-scale exercises around Taiwan, including drills simulating blockades and joint operations, which Beijing has characterized as warnings against independence. Taiwan’s government has responded by increasing defense preparedness and continues to describe China’s actions as ongoing military and psychological pressure.
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But Washington is calling Beijing’s bluff. A U.S. intelligence assessment on Wednesday suggests that China is not currently planning an invasion of Taiwan in the near term. In its latest Annual Threat Assessment, the U.S. intelligence community states that China does not have a fixed timeline for unification and is unlikely to pursue a military takeover by 2027, despite continuing to frame reunification as essential to its long-term goal of “national rejuvenation” by 2049. The report suggests Beijing still prefers to avoid direct conflict, even as it maintains political pressure and long-term strategic objectives toward Taiwan. Energy isn’t likely to be enough to lure Taiwan back into the fold.
Things could be different now, and Beijing is banking on rapidly mounting war-induced energy fears.
Taiwan lacks direct energy ties with China, but imports its energy commodities mostly via sea lanes, making it highly vulnerable to potential Chinese blockades. Thankfully, Taiwan President Lai Ching-te recently confirmed that the island’s energy needs for March and April have been fully secured. State-owned CPC Corporation is coordinating alternative sources for May to avoid potential deficits. Taiwan imports approximately 96% of its energy needs, with oil consumption totaling around 45 million tonnes (Mt) in 2024. The country is also a major global LNG importer, with natural gas demand reaching 29 Bcm in 2024, representing a CAGR of 5.3% since 2020. Nearly 80% of Taiwan’s LNG is used for electricity generation, with 15% going into the industrial sector while the residential sector consumes ~5%.
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Taiwan has adopted a “multi-source strategic approach,” sourcing LNG from more than 10 countries in a bid to mitigate single-point disruption risks. The country’s top LNG suppliers are Australia (38%), Qatar (25%), the United States (10%) and Papua New Guinea (7%). The country is also currently purchasing LNG in the spot market to fill the gap left by Qatar.
Iranian strikes on Qatar’s Ras Laffan complex have triggered a major disruption in global LNG flows, forcing a shutdown of exports from one of the world’s largest suppliers and removing up to 20% of global LNG supply from the market. The outage–expected to last weeks to months–has hit Asia hardest, given that roughly 90% of Qatari LNG is typically shipped to the region. In response, Asian buyers are scrambling to secure alternative cargoes, with U.S. LNG shipments increasingly diverted away from Europe, while countries such as Taiwan, South Korea, and India compete for limited supply. The disruption is tightening global gas markets, raising the risk of shortages and intensifying competition between Asia and Europe for available LNG volumes.
Taiwan’s response is to significantly ramp up imports of U.S. LNG, aiming to raise the U.S. share to 30%-33% in the current year, up from roughly 10% previously. Last month, Taiwan and the U.S finalized the Agreement on Reciprocal Trade (ART), a landmark trade pact that includes multi-billion dollar LNG supply commitments. As part of the deal, CPC Corp. has committed to purchasing $44.4 billion worth of U.S. LNG and crude oil through 2030. Last year, CPC signed a letter of intent to in and purchase 20 million metric tons per year from the Alaska LNG project, making Taiwan the first Asian country to back the $44-billion megaproject. Meanwhile, CPC maintains a 25-year sale and purchase agreement with Cheniere Energy (NYSE:LNG), the largest U.S. LNG exporter.
ART also includes pledges for $250 billion in Taiwanese investments in U.S. high-tech sectors like semiconductors. The Taiwanese government has also pledged an additional $250 billion in credit guarantees, bringing the total package value to $500 billion. Further, the project is supported by funding by the U.S. CHIPS Act. Building on its initial $65 billion commitment, Taiwan Semiconductor Manufacturing Company (NYSE:TSM) recently announced an additional $100 billion investment in the United States. TSMC, the world’s largest semiconductor chip foundry, plans to build six advanced chip fabrication plants and two packaging facilities in Phoenix, Arizona, creating a major AI chip production hub. The plants will produce sub-5nm, 3nm, and 2nm chips, with the first fab already active and subsequent fabs set to ramp up production in 2026-2030.
The expansion aims to secure U.S. supply chains for critical AI, high-performance computing, and mobile technologies. The Trump administration has set a target to have 40% of Taiwan’s semiconductor supply chain located domestically in the United States.
By Alex Kimani for Oilprice.com