Iran war forces China to unveil new energy plan
Beijing hedges its bets by turning to the United States for oil and gas after Strait of Hormuz shutdown
China appears to be hedging its bets by turning to the United States for oil and gas as the Iran war drags on. With Beijing looking to “diversify its supply,” the closure of the Strait of Hormuz has sent shock waves across the globe.
Up to 20% of the world’s daily crude and liquefied natural gas flows through the Gulf chokepoint. But since the shipping route was effectively shut down five weeks ago, energy costs have surged, stoking inflation fears.
Just a trickle has made its way to China, a long-term strategic ally of Iran and the largest oil importer from the Gulf nation. In 2024, Tehran joined the BRICS+ group, which is basically run by Beijing and backed by its economic muscle.
Still, finding new options as the conflict rages has become a priority. “China [is looking] to restart US energy imports as Iran tensions rattle markets,” Nikkei Asia reported today.
“China-bound tankers [are preparing] to load 600,000 barrels of American oil per day,” the global news site pointed out, quoting Kpler, the data analytics group.
Crude awakening:
- US President Donald Trump has been pushing Beijing to increase imports of American energy, according to the Semafor newsletter.
- Before the war broke out, China imported up to 80% of Iranian sanctioned oil at a discount price. But that has become a risky strategy.
Weapons that America needs run on Chinese-made critical raw minerals.
Agathe Demarais, European Council on Foreign Relations
Delve deeper: More importantly, the planet’s second-largest economy relies on its export machine to drive annual growth. “This pillar is now looking wobbly as elevated energy costs drain consumers’ wallets around the world,” Shuli Ren, a Bloomberg Opinion columnist, said.
Between the lines: “A slowdown in exports will likely create more overcapacity, trigger fiercer price wars at home and trim corporate profits,” she added last week.
Big picture: Yet, Beijing still has crucial cards to play. “Many of the missiles, fighter jets and other weapons that America needs for its war effort run on Chinese-made critical raw minerals,” Agathe Demarais, at the European Council on Foreign Relations, wrote.
Bottom line: “The US has only about two months of stocks. When US President Donald Trump heads to Beijing for tariff negotiations in the coming months, Chinese policymakers may come to the table with an ace up their sleeve,” she said last week.
China Factor comment: What is certain is that Beijing’s export model is unsustainable. Last year, the Middle East accounted for around a fifth of China’s vehicle exports. Now, they are stuck on container vessels going nowhere. Time to rip up the playbook.