Energy's geopolitical significance is undeniable, shaping international relations and influencing conflicts. The Belt and Road Initiative (BRI) traverses regions with significant energy reserves and transportation routes, making energy security along these routes crucial for global energy markets and economic stability. However, escalating religious, nationalistic, and racial conflicts, coupled with the proliferation of extremist groups and terrorist activities, pose a significant threat to energy production, supply, and transportation within BRI countries. Terrorist attacks have historically disrupted energy supply chains, causing price volatility and impacting global markets. This study addresses the critical gap in understanding the spatial spillover effects of terrorism on energy trade within the BRI context. It aims to provide a comprehensive spatial measurement of energy trade and terrorist activities, explore the impact pathways of terrorism on energy imports and exports using spatial econometric models, and utilize disaggregated indicators of terrorist activity for a more nuanced analysis of impacts. The study's findings are critical for assessing security risks and enhancing resilience in BRI energy cooperation.

Existing literature highlights the spatial dimensions of energy trade, tracing its evolution from geographically concentrated production to more decentralized patterns. Studies have explored the spatial correlations of energy production and trade within BRI countries, noting the concentration of energy production in the Middle East and Central Asia and processing hubs near production areas. Factors influencing energy trade include resource endowment, pricing, transportation costs, trade policies, geographical location, risks, and bilateral agreements. Spatial distance significantly impacts transportation costs, influencing trade partner selection. Economic conditions in exporting countries affect their export capacity, while trade agreements and geopolitical risks, including terrorism, significantly impact energy trade. Existing literature offers conflicting views on terrorism's impact on BRI energy trade—some argue it severely inhibits trade, while others suggest regional variations and even a potential positive effect on trade with certain neighboring countries. However, there is a lack of studies exploring the spatial association between energy trade and terrorism, especially concerning spatial spillover effects.

This study focuses on 64 countries along the Belt and Road Initiative, covering Northeast Asia, Southeast Asia, South Asia, Central Asia, West Asia & North Africa, and Central & Eastern Europe. The study period is 2008–2019. Exploratory Spatial Data Analysis (ESDA) is employed to examine the spatial distribution characteristics of energy imports and exports between China and BRI countries, and terrorist activities using Moran's I for global spatial autocorrelation and Local Indicators of Spatial Association (LISA) for local spatial autocorrelation. A Spatial Durbin Model (SDM) is then used to analyze the impact of terrorism on China's energy trade, considering the spatial interdependence and spillover effects. The SDM incorporates the terrorism index (Terrorisml) and its sub-indicators (number of occurrences, deaths, and injuries from terrorism), GDP, Liner Shipping Connectivity Index (LSCI), and energy export dependence (REP) as explanatory variables. Data on energy trade comes from the UN Comtrade database, while terrorism data are sourced from the Global Terrorism Index Report and Global Terrorism Database. The SDM is estimated using maximum likelihood (ML) estimation to account for spatial autoregressive effects. Robustness checks are conducted by: 1) changing the spatial weight matrix; 2) lagging explanatory and control variables; and 3) employing a dynamic SDM. Regional heterogeneity analysis is performed by dividing the BRI countries into eastern, central, and western regions.

ESDA reveals significant spatial clustering of China's energy imports (concentrated in West Asia and North Africa), energy exports (concentrated in Southeast Asia), and terrorist activities (concentrated in West Asia and North Africa, South Asia, and Central Asia). The SDM results show a significant negative impact of the terrorism index on China's energy imports, consistent with Hypothesis 1. A positive spatial spillover effect is also observed, meaning terrorism in neighboring countries positively impacts China's energy imports from a focal country, possibly due to the geographic concentration of energy resources and substitution mechanisms in energy trade. The number of terrorist incidents and deaths also negatively affect imports, but without significant spatial spillover effects. The terrorism index has no significant impact on China's energy exports, but a negative spatial spillover effect is identified. The number of terrorist activities has a positive impact on China's energy exports, while the number of deaths has a negative impact. Regional heterogeneity analysis shows the strongest negative impact of terrorism on China's energy imports in the central region (South Asia, Central Asia, West Asia, and North Africa). Robustness checks using alternative spatial weight matrices, lagged variables, and a dynamic SDM confirm the main findings.

The findings highlight the complex relationship between terrorism and China's energy trade within the BRI. The negative direct effect of terrorism on energy imports is expected, as terrorist activities disrupt energy production and transportation, increasing costs and risks. The positive spatial spillover effect on imports indicates that while terrorism negatively impacts energy production in a specific location, China may increase imports from geographically proximate countries with abundant energy resources. The negative spatial spillover effect on exports suggests that heightened security concerns in neighboring countries may deter energy trade, potentially affecting market access and overall confidence. The differential impact of terrorist incidents versus deaths on energy exports aligns with the notion that high-death events trigger greater geopolitical risks and disrupt trade more significantly than high-frequency events. The study's findings underscore the importance of considering spatial spillover effects when assessing the impact of terrorism on energy trade. Regional differences highlight the need for tailored strategies to manage risks in different BRI regions.

This study demonstrates the significant impact of terrorism on China's energy trade with BRI countries, highlighting both direct and indirect effects and spatial spillover patterns. The findings call for comprehensive strategies to mitigate these risks, including increasing energy reserves, exploring domestic energy resources, strengthening international energy cooperation, and enhancing counter-terrorism mechanisms. Future research could explore the impact of specific terrorist groups, different types of energy, and the role of specific policies in shaping energy trade dynamics within the BRI context.

The study relies on publicly available data, which might not capture the full complexity of energy trade and terrorist activities. The SDM assumes a linear relationship between variables, which might not fully capture the non-linear dynamics. Further research employing more granular data and sophisticated modeling techniques is encouraged to refine the understanding of this complex relationship.