When the Strait of Hormuz was practically sealed after the outbreak of the well-known Third Gulf War, the world held its breath. In the midst of widespread panic over the strangulation of one of the planet’s most vital energy arteries, the first major tectonic movement came from Beijing. The Asian giant opted for the crudest pragmatism: it ordered its large refineries to immediately and opaquely stop gasoline and diesel exports to shield its own tanks. China isolated itself to survive.
However, in just a few weeks, the board has taken an unexpected turn. With Asia looking into the abyss of shortages, Beijing has decided to reopen the valve, going from being a protectionist actor to establishing itself as the region’s great energy lifeline.
Asia’s savior: China. The shockwaves of war have left the Indo-Pacific region shivering. Asia has become “ground zero” of the crisis. In Australia, panic has emptied gas stations, forcing the government to make emergency tax cuts; India has had to sacrifice tax revenue to freeze prices due to shortages; Japan has refused to share its strategic reserves with its neighbors; and airlines in Vietnam have had to massively cancel their flights due to the lack and extra cost of aviation fuel.
In the midst of this desperation, China has made its move. As anticipated BloombergBeijing has given the green light to its state refineries to export 500,000 tons of fuels (gasoline, diesel and kerosene) over the next month. According to sources cited by Oilpricecompanies such as Sinopec and China National Petroleum Corporation (CNPC) already have shipments ready on ships that will be destined, as a rescue, to severely punished neighboring nations such as Vietnam and Laos.
The energetic rice bowl. That China can afford to export fuel while the rest of the continent applies rationing measures is not a miracle, it is the result of a silent strategy. China took advantage of the previous years to buy heavily sanctioned and cheap crude oil (Russian, Venezuelan and Iranian), managing to accumulate colossal reserves of almost 1.4 billion barrels. According to researcher Henry Tugendhat, this gives Beijing a cushion of about 104 days of domestic demand, in addition to having a “floating warehouse” of Iranian oil tankers anchored off its coast waiting to be unloaded.
Returning to “Game of Thrones.” But Beijing’s move goes far beyond helping its neighbors; It is a direct geopolitical challenge. As detailed South China Morning Post (SCMP)China has for the first time activated its so-called “Blockade Rules” of 2021. The Chinese Ministry of Commerce has issued an official order prohibiting domestic companies from complying with the sanctions recently imposed by the United States.
Washington had sanctioned five independent Chinese refiners (known as “teapots”), including Hengli Petrochemical, accusing them of financing the Iranian military by purchasing their oil. By ordering the disregard of these sanctions as an “improper extraterritorial application,” Beijing demonstrates that it not only has physical control of the crude oil, but that it is willing to engage in a legal and financial confrontation with the United States to protect its supply lines.
Tightrope diplomacy. The short-term scenario will be played out in the offices. As explained The New York TimesChina is playing both sides in this conflict. On the one hand, he acts as a peaceful mediator, pushing Iran to negotiate to de-escalate tension, having been key in the fragile temporary ceasefires. However, on the other hand, US intelligence agencies suspect that Chinese companies continue to export dual-use material and even military technology to Tehran.
All of this is meticulously calculated ahead of the imminent May 14 summit in Beijing between Xi Jinping and US President Donald Trump. According to the analysts consulted by the New York media, the fact that the US is bogged down in the Middle East and rapidly spending its military resources gives China a position of tremendous strength to negotiate on tariffs, trade and the US naval blockade.
Lenergy as the definitive weapon of the 21st century. The Strait of Hormuz crisis has functioned as a stress test for energy globalization. The sanctions drawn up in Washington attempt to financially suffocate the actors in the conflict, but the tyranny of physical infrastructure imposes its own rules.
China has shown that the energy wars in this decade are not only decided with naval deployments, but with warehouses full of strategic reserves, independence in refining capacity and overwhelming dominance in the manufacturing of renewable energy. By reopening its export tap, Beijing sends a clear message to the world: while the West hyperventilates over the price of a barrel, China is the one who has the ability to decide who is left in the dark in Asia.
Image | Photo by Bundo Kim on Unsplash
| China is one of the largest refining powers on the planet. And he has decided something: to keep all the gasoline he produces
