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  Monday, June 27, 2022



China's race into Iran oil

China's increasing need for imported energy has given it an incentive to become closer to Iran.

With 1.3 billion people, the People's Republic of China is the world's most populous country and the second largest oil consumer, behind the U.S. In recent years, China has been undergoing a process of industrialization and is one of the fastest growing economies in the world. With real gross domestic product growing at a rate of 8-10% a year, China's need for energy is projected to increase by 150 percent by 2020. to sustain its growth China requires increasing amounts of oil. Its oil consumption grows by 7.5% per year, seven times faster than the U.S.'

Growth in Chinese oil consumption has accelerated mainly because of a large-scale transition away from bicycles and mass transit toward private automobiles, more affordable since China's admission to the World Trade Organization. Consequently, by year 2010 China is expected to have 90 times more cars than in 1990. With automobile numbers growing at 19% a year, projections show that China could surpass the total number of cars in the U.S. by 2030. Another contributor to the sharp increase in automobile sales is the very low price of gasoline in China. Chinese gasoline prices now rank among the lowest in the world for oil-importing countries, and are a third of retail prices in Europe and Japan, where steep taxes are imposed to discourage gasoline use.

Where will China get its oil?
China’s ability to provide for its own needs is limited by the fact that its proven oil reserves are small in relation to its consumption.

During the 1970s and 1980s China was a net oil exporter, it became a net oil importer in 1993 and is growingly dependent on foreign oil. China currently imports 32% of its oil and is expected to double its need for imported oil between now and 2010. A report by the International Energy Agency predicted that by 2030, Chinese oil imports will equal imports by the U.S. today.

China's expectation of growing future dependence on oil imports has brought it to acquire interests in exploration and production in places like Kazakhstan, Russia, Venezuela, Sudan, West Africa, Iran, Saudi Arabia and Canada. But despite its efforts to diversify its sources, China has become increasingly dependent on Middle East oil. Today, 58% of China's oil imports come from the region. By 2015, the share of Middle East oil will stand on 70%.

China-U.S. relations
China-U.S. relations are influenced by a wide array of issues from Taiwan to trade relations and human rights. But undoubtedly access to Middle East oil will become a key issue in the relations between the two powers.

But China-U.S.
inclination is balanced by the feeling among many Chinese leaders that the U.S. seeks to dominate the Persian Gulf in order to exercise control over its energy resources and that it tries to contain China's aspirations in the region. The U.S. is therefore considered a major threat to China's long-term energy security.

China and Middle East
Although China is banking on oil development projects outside the Middle East, Beijing most likely will insist on nurturing its relations with the main oil-producing states in that region as an insurance policy. But its attempts to gain a foothold in the Middle East and build up a long-term strategic links with countries sensitive to the U.S. could also bear heavily on U.S.-China relations. Especially troubling are China's arms sales to the region, its support of Iran and its proliferation of dual use technology.

U.S. Congress' warning!
A report by the China-U.S. Security Review Commission, a group created by Congress, warned that China's increasing need for imported energy has given it an incentive to become closer to countries like Iran:
"A key driver in China's relations with Middle-East governments is its dependence on foreign oil to fuel its economic development. This dependency is expected to increase over the coming decade."
China's relations with such countries has provided these countries a great deal of money, allowing them to continue to grow their economics and to maintain their policy.

China and Iran
China is the number one oil and gas importer from Iran. The two countries are bound by energy deals reaching a total value of $120 billion and growing. While the U.S. and EU were forging a diplomatic strategy to halt Iran’s nuclear program, China signed in October 2004 its largest energy deal with Iran ever and promised to block any American attempt to refer Iran’s nuclear program to the UN Security Council. This may indicate not only that China is interested in a militarily strong, even nuclear Iran that dominates the Gulf but also that for China, energy security considerations trump international cooperation on critical global security issues.

China-Iran-Hormuz strait
China also provides conventional weapons that could threaten U.S. military forces securing the Persian Gulf and specially Hormuz strait. Of particular concern are China's sales to Iran of anti-ship cruise missiles, which pose a threat to oil tanker traffic and American naval vessels operating there. This arms trafficking presents an increasing threat to U.S. global security interests, particularly in the Middle East and Asia.

China and Hispanics
In the Western Hemisphere China concluded oil and gas deals with Argentina, Brazil, Peru, and Ecuador. But its main country of interest is Venezuela, U.S.' fourth largest oil supplier. A series of oil agreements signed in early 2005 allow Chinese companies to explore for oil and gas and set up refineries in Venezuela. Chinese state-owned oil companies have also begun seeking ambitious oil deals in Canada, the top petroleum supplier to the U.S. China’s continued penetration into the Western Hemisphere could have profound economic and political implications for the U.S. Considering the fact that both U.S.’ and Mexico’s domestic crude production are falling, the U.S. cannot afford to lose chunks of the crude produced by the two countries that together supply a third of its oil imports. With less oil available to the American market the U.S. will be forced to seek this oil elsewhere, primarily in the Middle East, hence becoming more dependent on this tumultuous region.

Extracted from IAGS



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