How China’s Iran support could spark a Persian Gulf energy war
In a statement carried by state television on Oct. 1, Iran’s military vowed to attack energy infrastructure in the Middle East if the U.S. or its partners ramp up support of Israel.
In September 2019, drone attacks significantly damaged facilities operated by Saudi Aramco, Saudi Arabia’s state-owned oil company. Tehran, which denied responsibility, is widely believed to have been behind the strikes, which were launched from Yemen by Iran-backed Houthi militants. Moreover, the Houthis, Iranian proxies, have carried out persistent attacks on Red Sea shipping, including oil tankers.
As the war in the Middle East spreads, the possibility of disruption of global energy markets grows. Tensions have driven up oil in recent days, and some predict historically high prices if the Strait of Hormuz is blocked.
Some fear that Israel will soon destroy Iran’s oil ports and other facilities. Gulf states, worried about retaliatory strikes on their energy sites, have been lobbying Washington to persuade Israel not to hit oil targets in Iran.
Asian refiners do not appear to be overly concerned. They “remain confident” that the war will not disrupt flows of oil from the Persian Gulf to their facilities, believing both Israel and Iran “are likely to prefer keeping East Asia neutral in their conflict.”
So far, there have been almost no shortfalls or disruptions. No wonder feedstock managers, analysts, refiners and traders are “growing numb” to the war.
There is also a sense that China will act as a force for stability. The country, which is increasingly relying on oil-hungry factories to power its economy, has every incentive to maintain the flow of oil from the Persian Gulf.
“The long game for China is energy,” Jonathan Bass of Argent LNG told me this week.
An official at a “state-run Chinese refiner” told S&P Global, “If China ever faces any serious oil import flow disruption, I highly doubt Beijing will just sit and do nothing.”
“Very tough measures will be taken, such as military actions,” the official added.
So far, China has not suffered supply disruptions. The country last year took around 90 percent of Iran’s exports of crude oil.
Iran was not even in China’s top 10 suppliers of crude in August of this year. Iraq, Saudi Arabia, Oman, the United Arab Emirates, Kuwait and Qatar were, however.
China, according to its General Administration of Customs, obtained 54 percent of its crude oil from the Middle East in the January-August period.
China, unfortunately, is not a source of regional stability. Beijing in August publicly goaded Iran to retaliate against Israel, it backs Palestinian factions, providing diplomatic and propaganda support for Iran’s attacks. It has also been supplying weapons to Hamas, Hezbollah and the Houthis in addition to Iran itself. Iran can sustain the war against the Jewish state due in large part to Beijing’s backing.
Washington has to be concerned that Beijing sees an opportunity to deny or at least restrict Middle East energy to others.
Japan and South Korea, two American allies and targets of Chinese diplomacy in recent years, are also big takers of Middle East energy. Four of South Korea’s top five suppliers of crude — Saudi Arabia, UAE, Iraq and Kuwait — are in that region.
Japan is particularly vulnerable. Its Ministry of Economy, Trade and Industry reported that in the first eight months of this year, the country obtained more than 96 percent of its crude imports from the Persian Gulf.
“Everyone says this is beginning to look like an energy war,” Bass told me. “China is angling to get control of the world’s light switch.”
How can China do that? By getting the support of all major regional producers.
Chinese leaders have made strides in that direction by entering into a $400 billion, 25-year “strategic partnership agreement” with Iran in 2021, brokering an agreement between long-time rivals Iran and Saudi Arabia in 2023 and uniting 14 Palestinian factions with their July Beijing Declaration.
The U.S. has lost some interest in the region because in recent years it has been the world’s leading energy producer. America, as it is now called, is the “new Saudi Arabia,” pumping more crude oil than any other country in history for six years in a row. Also, no country now produces more natural gas.
As a result of the U.S. energy boom, the U.S. is a major supplier of crude oil to, among others, South Korea. In August, it was the South’s second-largest supplier of this commodity.
Yet America’s position as an energy exporter is threatened by those wanting to restrict or phase out drilling. Significantly, the Department of Energy has now paused the issuance of permits for the export of natural gas.
“We need permitting reform so that we can construct facilities and infrastructure to meet the needs of Americans and its allies and partners in, among other places, Asia,” Bass says. “It’s going to be a very dark night for our friends — and the world — when Xi Jinping controls energy.”
Gordon G. Chang is the author of “Plan Red: China’s Project to Destroy America and The Coming Collapse of China."
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Tag: | Iran |
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