China’s Ultimate Play For Global Oil Market Control

Lambert here: “Both MBS and MBZ consider the last-minute cancellation of the US retaliatory strike [for Iran shooting down a US drone] a personal affront and humiliation because Trump did not accept and follow their positions and demands for action. Both MBS and MBZ are now convinced that not only the US demonstrated weakness and lack of resolve, but that Pres. Trump was personally not committed to fighting Iran on behalf of Saudi Arabia and the Gulf sheikhdoms.” Oh, let’s you and him fight!

By Yossef Bodansky, Director of Research at the International Strategic Studies Association (ISSA) and Senior Editor of Defense & Foreign Affairs publications (including the Global Information System: GIS), was, for more than a decade, the Director of the US House of Representatives Task Force on Terrorism and Unconventional Warfare. Originally published at OilPrice.com.

All attention is focused on the twists-and-turns of the very noisy US-Iran dispute in the Persian Gulf, but all the while the People’s Republic of China (PRC) is rapidly and quietly consolidating a dominant presence in the area with the active support of Russia.

Beijing, as a result, is fast acquiring immense influence over related key dynamics such as the price of oil in the world market and the relevance of the petrodollar. The PRC and the Russians are capitalizing on both the growing fears of Iran and the growing mistrust of the US. Hence, the US is already the main loser of the PRC’s gambit.

The dramatic PRC success can be attributed to the confluence of two major trends:

(1) The quality and relevance of what Beijing can offer to both Iran and the Saudi-Gulf States camp; and

(2) The decision of key Arab leaders — most notably Saudi Crown Prince Mohammed bin Salman bin ‘Abd al-’Aziz al Sa’ud (aka MBS) and his close ally, the Crown Prince of Abu Dhabi, Sheikh Mohammed bin Zayed Al Nahyan (aka MBZ) — to downgrade their traditional close ties with the US, and reach out to Beijing to provide a substitute strategic umbrella.

Hence, the PRC offer to oversee and guarantee the establishment of a regional collective security regime — itself based on the Russian proposals and ideas first raised in late July 2019 — is now getting considerable positive attention from both shores of the Persian Gulf. Iran, Saudi Arabia, the United Arab Emirates (UAE), Qatar, and Oman appear to be becoming convinced that the PRC could be the key to the long-term stability and prosperity in the Persian Gulf and the Arabian Peninsula.

Iran is also considering the expansion of security cooperation with Russia as an added umbrella against potential US retaliation.

Overall, according to sources in these areas, the US was increasingly perceived as an unpredictable, disruptive element.

The profound change in the attitude of the Saudi and Emirati ruling families, who for decades have considered themselves pliant protégés of the US, took long to evolve. However, once formulated and adopted, the new policies have been implemented swiftly.

The main driving issue is the realization by both MBS and MBZ that, irrespective of the reassuring rhetoric of US Pres. Donald Trump and Jared Kushner, their bitter nemesis — Qatar — is far more important to the US than the rest of the conservative Arab monarchies and sheikhdoms of the GCC. The last straw came in early July 2019 in the aftermath of the visit of the Emir of Qatar, Sheikh Tamim bin Hamad Al Thani, to Washington, DC. Sheikh Tamim received an extravagant reception from both Pres. Trump in person and official Washington. Trump lavished praises on Qatar and the Emir, and emphasized the US renewed commitment “to further advancing the high-level strategic cooperation between our two countries”.

There are good reasons for the US preference of Qatar.

The Al-Udeid Air Base in Qatar is by far the most important US base in the entire greater Middle East. Qatar is mediating between the US and several nemeses, including Afghanistan, Iran, and Turkey. Qatar is providing “humanitarian cash” to HAMAS in the Gaza Strip, thus buying quiet time for Israel. Qatar has given generous “political shelter” to numerous leaders, seniors, and commanders of questionable entities the US would like to protect but would never acknowledge this (including anti-Russia Chechens and other Caucasians, and anti-China Uighurs).

Qatari Intelligence is funding and otherwise supporting the various jihadist entities which serve as proxies of the CIA and M?T (Milli ?stihbarat Te?kilat?: the Turkish National Intelligence Organization) in the greater Middle East (mainly Syria, Iraq, Libya, Jordan, Yemen) and Central Asia (mainly Afghanistan-Pakistan, China’s Xinjiang and Russia’s Caucasus and the Turkic peoples of eastern Siberia).

On top of this, Qatar is purchasing billions of dollars’ worth of US-made weapons; and paying cash on-time (unlike the habitually late Saudis who now cannot afford to pay what they’ve already promised).

Moreover, the Middle East is awash with rumors that Qatari businessmen saved the financial empire of the Kushner family by investing at least half-a-billion dollars in the 666 5th Avenue project in New York. The rumors are very specific in that the investment was made for political reasons on instruction of the Emir. In the conspiracies-driven Arab Middle East, such rumors are believed and serve as a viable motive for the policies of the Trump White House: an ulterior motive the Saudis and Gulfies cannot challenge.

The handling by the Trump White House of the Iranian shootdown of the US RQ-4A/BAMS-D Global Hawk drone on June 20, 2019, only exacerbated further the anguish of both MBS and MBZ. Both of them, along with other Arab leaders, urged the Trump White House to strike hard at Iran in retaliation. Both MBS and MBZ communicated in person with the most senior individuals at the White House. They were stunned to learn that Trump communicated directly with Tehran on the possibility of a largely symbolic retaliatory strike, and the prospects of bilateral negotiations.

Both MBS and MBZ consider the last-minute cancellation of the US retaliatory strike a personal affront and humiliation because Trump did not accept and follow their positions and demands for action. Both MBS and MBZ are now convinced that not only the US demonstrated weakness and lack of resolve, but that Pres. Trump was personally not committed to fighting Iran on behalf of Saudi Arabia and the Gulf sheikhdoms.

Furthermore, there is growing trepidation in Saudi Arabia about the viability of the Pakistani guarantees to the Kingdom, particularly concerning nuclear deterrence.

In the past, Islamabad mediated the Saudi purchase of ballistic missiles from the PRC (procurements which are supported by Pakistani military technicians and security personnel) and had allocated two nuclear warheads for launch from Saudi Arabia in case of an Iranian attack, all in return for lavish Saudi funding of Pakistan’s nuclear and strategic weapons programs.

However, there has been a profound turnaround in Pakistani policies starting in the Summer of 2019.

First, Pakistan reached a comprehensive military agreement with Turkey with the latter providing weapons and other military systems, as well as training, in order to replace US and Western systems which were no longer available. In the first area of active cooperation, Turkey mediated modalities for trilateral cooperation (Turkey, Iran, and Pakistan) in fighting Baluchi jihadists and insurgents. Second, Pakistan is expediting the shipping of huge quantities of Iranian gas to western China by mainly using existing pipelines, from the Fars fields to Chabahar, then via the Iran-Pakistan pipeline to Gwadar, and then via the CPEC (the China-Pakistan Economic Corridor) pipeline to Xinjiang. As well, Iran and Pakistan cooperate closely in negotiations with various Afghan factions to ameliorate any US achievements in the Doha negotiations with the Taliban.

Hence, both MBS and MBZ wonder, can Saudi Arabia trust Pakistan to deter and confront Iran and its allies on behalf of Saudi Arabia?

Concurrently, with the face-off with the US not going away, Iranian Supreme Leader Ayatollah Sayyed Ali Khamene‘i convened anew the key Iranian leaders in order to reiterate the tenets of Tehran’s strategy and to reinforce their resolve. Khamene‘i stressed his and Iran’s commitment to becoming the leading regional power, and repeated that there was no possibility for a negotiated compromise with the US. In the meeting, Khamene‘i stated “three directives for Iran” which were to be followed and realized under any condition. As reported by authoritative commentator Elijah Magnier, Khamene‘i’s directives are:

“1. Adherence to Iran’s right to nuclear enrichment and everything related to this science at all costs. Nuclear enrichment is a sword Iran can hold in the face of the West, which wants to take it from Tehran. It is Iran’s card to obstruct any US intention of ‘obliterating’ Iran.

“2. Continue to develop Iran’s missile capability and ballistic programs. This is Iran’s deterrent weapon that prevents its enemies from waging war against it. Sayyed Ali Khamene‘i considers the missile program a balancing power to prevent harm against Iran.

“3. Support Iran’s allies in Iraq, Syria, Lebanon, and Yemen, and never abandon them, because they are essential to Iran’s national security.”

Elijah Magnier further explained that “Sayyed Khamene‘i recommended these commandments to preserve the Islamic Republic of Iran, and that each of these three items is equally important for the safety of Iran, its existence and continuity, and national and strategic security.”

The aggregate objective of these three directives, Khamene‘i elaborated, was to enable and expedite the ascent of Iran as a regional power. The Iranian strategic ascent would manifest itself by tight control over both the Strait of Hormuz and the Bab al Mandab, as well as the entire Persian Gulf and Arabian Sea; that is, controlling the region’s oil and gas exports. Emboldened, the Iranians would intensify their demands for the return of “traditional Iranian territory”, starting with Bahrain [even though the Iranian Government of Shah Mohammed Reza Pahlavi had formally relinquished its claim on Bahrain in 1970 — Ed.].

There can be expected to be growing demands from Tehran to empower the Shi’ite population of the eastern Arabian Peninsula — where all the oil and gas reserves are located — in accordance with Iran’s long-term commitment to the establishing of an Islamic Republic of Eastern Arabia.1 These are all traditional long-term demands of Iran. The novelty in Khamene‘i’s most recent address is the assertiveness and immediacy of the Iranian quest to meet these demands.

The importance and essence of Khamene‘i’s message spread across the Persian Gulf quickly. Consequently, both MBS and MBZ are cognizant that Khamene‘i’s Tehran was unlikely to compromise or go back on these commitments and objectives. There was no similar indication of resolve coming from Trump’s Washington. Thus, MBS, MBZ and most other Arab leaders had become increasingly convinced that the US would sooner or later withdraw from the Persian Gulf and the greater Middle East. The current bluster and assertiveness of the Trump Administration could not negate the overall trend: that of the US disengagement and withdrawal.

The Arab leaders believe that the US would empower Israel as a subcontractor, but Israel has its own priorities and vital interests. Michael Young articulated the perception of the region’s leaders in the August 7, 2019, issue of The National of the UAE. “A new regional security order is emerging, with Israel taking a much more interventionist approach and playing a military rôle partly replacing that previously fulfilled by Washington, particularly with regard to Iran. Israel’s efforts to counter Iran have paralleled those of a number of Arab states, with all sides adapting to a new situation in which the US has decided to militarily disengage from the Middle East.”

Both MBS and MBZ concluded that they need a far stronger strategic umbrella than the US and Israel could offer in order to survive in the era of Iran’s ascent.

As a result, MBZ reached out to Beijing in early July 2019. After comprehensive preparatory negotiations, MBZ arrived in Beijing on July 20, 2019, for a milestone visit in which he met PRC Pres. Xi Jinping for lengthy discussions. According to PRC senior officials, Mohammed bin Zayed and Xi Jinping “elevated the two countries’ relationship to that of a strategic partnership”. The key outcome was the UAE’s acceptance of the dominance of the PRC and Russia in the Persian Gulf.

“The UAE and China are moving towards a promising future,” MBZ said in his concluding meeting with Xi Jinping. His visit aimed at “developing co-operation and a comprehensive strategic partnership, as well as opening new horizons for joint action in various sectors,” MBZ explained. Xi Jinping responded by stressing “the profound significance of China-Arab relations”. The PRC and the UAE would now work closely together to transform the Persian Gulf into “a security oasis” rather than a new “source of turmoil”.

Significantly, Xi Jinping referred to “a hundred years of grand plan” when describing the PRC’s relations with the UAE. MBZ also signed a large number of bilateral agreements, both economic and strategic.

While in Beijing, Mohammed bin Zayed asked Xi Jinping to mediate a deal with Tehran in order to negate the US-driven escalation and possible war. The PRC moved very fast, and within a few days dispatched to Tehran a high-ranking delegation led by the head of the International Liaison Department of the Communist Party of China (CPC), Song Tao. His mandate was to discuss the new security regime for the Persian Gulf, as well as the conditions for increasing PRC purchase of Iranian oil in disregard of the US sanctions. On the Iranian side, Song Tao’s official host was the highly influential Secretary of the Expediency Council, Mohsen Rezaei. This meant that Khamene‘i was directly involved. Song Tao stayed in Tehran for three days and met with a large number of senior officials, mostly members of Khamene‘i’s innermost circle of confidants and advisors.

All the Iranian officials were very assertive regarding Iran’s resolve to withstand US pressure at all cost, and eager for PRC cooperation in stabilizing the region and preventing war.

Rezaei articulated Iran’s strategy. “Any kind of insecurity and conflict in this region would carry harm to global peace and security,” he stated. “Americans and Britain have been fanning the flames of war in the Persian Gulf region and they want to pretend they have control over the Strait of Hormuz and the movement of vessels. Of course, we do not allow this to happen. In the meantime, we expect cooperation from our friends in China.”

He hoped for Chinese cooperation in preventing escalation. Should such cooperation fail to materialize, Iran would have to act boldly. “Persian Gulf security is our security and we have to respond to their attacks and destabilizing actions in order to maintain security,” Rezaei stated. Tehran’s preference is for the PRC to help in securing “free shipping and security in the Persian Gulf”.

The Head of Iran’s Foreign Policy Strategic Council, Kamal Kharrazi, reminded Song Tao that “both Iran and China are opposed to US’s unilateralism and hegemony”.

Hence, both countries should work closely together in confronting the US. The Speaker of the Iranian Parliament, Ali Larijani, also stressed that close cooperation “can help counter the US animosity and neutralize its consequences”. He suggested that Russia should be brought into the new security regime in the Persian Gulf. Larijani urged the PRC to expedite its anti-US intervention in the Persian Gulf because “success of this plan is contingent upon practical steps”. Foreign Minister Mohammad Javad Zarif noted “the two countries’ common strategic outlook toward international developments”, and urged close cooperation in order to reverse “Washington’s attempts to impose its own hegemony on the world”.

All the Iranian officials had no problem with some form of rapprochement with the UAE and Saudi Arabia provided they did neither participate in a war against Iran, nor permit the US to use their territory and bases for strikes against Iran and Iranian proxies.

The PRC delegation was impressed by the Iranian eagerness to cooperate and to accept a PRC umbrella.

Song Tao told his interlocutors that “the mission of the delegation is to strengthen the strategic coordination and dialogue between the two countries and we are willing to confront challenges and problems together”. He agreed with the imperative to jointly confront the US, and accepted the need to move fast jointly. Song Tao concurred that “there are complicated and rapid developments happening on the international stage that have created challenges for the countries of China and Iran, but our resolve and determination is to support Iran’s legal and legitimate rights to development and progress”. Song Tao promised to discuss in Beijing concrete ideas how to improve and expand the PRC’s policy of “long-term strategic” ties with Iran in view of the current situation in the Persian Gulf.

By now, the PRC Government had already organized the first meeting between Emirati and Iranian senior officials. First, on July 26, 2019, an Emirati “peace delegation” arrived in Tehran for secret discussions on the new modalities of bilateral relations, new security regimes in the Persian Gulf and Yemen (from where the UAE is withdrawing to the chagrin of Saudi Arabia), and overall GCC-Iran relations. The emphasis was on crisis management and the prevention of accidental escalation in the Persian Gulf. On July 30, 2019, the UAE dispatched a high-level Coast Guard delegation to Tehran.

Officially, the two sides discussed maritime border control and patrolling in order to avoid misunderstandings and clashes. The delegation included an undeclared senior emissary of MBZ. He assured his Iranian interlocutors that the UAE was ready for a fundamental change of relationship with Iran including a “rapprochement” and expansion of trade. The UAE also committed to distancing from the US, accepting PRC influence in the entire region, and working with Iran for a regional security regime.

One of the key issues raised with the Emirati delegation in Tehran was the Saudi position. The UAE emissary asserted that all of the recent activities, including the request for PRC mediation, were the outcome of close coordination between MBZ and MBS. However, he explained, given the close relations between MBS and the Trump White House, MBS felt more constrained in making a dramatic shift the way MBZ did.

Therefore, on July 31, 2019, Zarif offered an olive branch.

He declared that “Iran is prepared for dialogue if Saudi Arabia is also ready”. He repeated the message in an interview with the official IRNA. “If Saudi Arabia is ready for talks, Iran is always ready for negotiation with neighbors,” Zarif stated. Tehran “is interested in cooperation with [her] neighbors.” Just to be on the safe side, the next day — August 1, 2019 — Iran sent a reminder of the alternative. The Houthis launched a ballistic missile attack on Saudi military positions near Dammam city.

Located in the Shi’ite area on the shores of the Persian Gulf, Dammam is a critical center of the Saudi oil infrastructure, including a major oil port. Riyadh got the message. Hence, on August 3, 2019, the UAE Minister of State for Foreign Affairs Anwar Gargash stated that “the United Arab Emirates and Saudi Arabia prefer a political approach to their problems with Iran”.

Iran acted on the message. High-level emissaries traveled secretly to Mecca in early August 2019 as part of the Iranian delegation to prepare for the Hajj (August 9-14, 2019). They held secret talks about the future of the Persian Gulf with Saudi senior officials. These talks were personally supervised and micromanaged by MBS, who made all the decisions and determined the Saudi positions. Although the Saudis were forthcoming, and repeatedly expressed their desire to avoid escalation and fighting, they were also reticent to break with the US. Related: China Still Reluctant To Buy U.S. Crude Oil

Simply put, the Saudis — reflecting the persona of MBS — were risk-averse and incapable of making concrete decisions. They neither said “no” to anything, nor did they commit to anything concrete.

The Iranian negotiators were encouraged by the overall spirit of the negotiations, but frustrated with the slow progress of the discussions. Therefore, on August 7, 2019, Iranian Foreign Minister Mohammed Javad Zarif taunted Riyadh. He urged Saudi Arabia to make its own decision rather than be subservient to the US.

“Some countries see their future and security hinged upon dependence and regard security as something purchasable, and think that they can maintain their security by paying money and buying weapons and learn nothing from history,” Zarif said. “How come [Saudi Arabia] did not realize that money does not bring security?” The Saudi posture is in stark contrast to the posture of the Islamic Republic of Iran. “We never buy security, nor do we sell security because we derive our security, development, and legitimacy from [our] people,” Zarif concluded.

One of the reasons Tehran felt confident to prod both Riyadh and Abu Dhabi was that both were by now engulfed in a major crisis concerning the US. For a long time, MBS, MBZ and their close aides suspected that the US was hiding major matters from them. While the Trump White House kept demanding uncompromising confrontation with Tehran and warning against any and all contacts, MBS and MBZ suspected that Washington was not itself following these principles. Both Riyadh and Abu Dhabi have long known about active channels and mediation efforts by Doha, but whenever the subject came up, Trump’s Washington would assure them that the Qatar channel was only procedural and not much different from the US interests office in the Swiss Embassy in Tehran.

Then, on August 5, 2019, the US Ambassador to Iraq, Matthew Tueller, dropped the bomb.

“We have direct communication channels with Tehran,” he acknowledged. And these are not simple channels. While diplomatic discussions and de facto negotiations are taking place via the good services of Doha, the back-channel in Baghdad was specifically with the Iranian Revolutionary Guard Corps’ (IRGC: Pasdaran) Qods Force. These contacts were aimed to minimize the likelihood of clashes and misunderstandings in Syria, Iraq, Yemen, and the Persian Gulf. This venue was most logical because the local Iranian Ambassador is Brig. Gen. Iraj Masjedi who is the right-hand man and deputy of Qods Force Commander Maj.-Gen. Qassem Soleimani.

According to Iraqi senior officials, some of the US-Iranian communications regarding the aftermath of the shoot-down of the US drone were held via this venue. The US also used this channel to try and convince Tehran not to attack the US forces in al-Tanf (southern Syria) and in the Ein al-Assad Air Base and adjacent bases (western Iraq).

Both Riyadh and Doha were stunned and humiliated because the Trump White House did not bother to inform them of the Baghdad back-channel, while pressuring them to avoid all contacts and negotiations with Iran.

Another reason for the growing self-confidence and assertiveness of Iran was the most recent evolution of its strategic relations with Russia. On July 28, 2019, the Commander of the Iranian Navy, Rear Adm. Hossein Khanzadi, was in Russia, ostensibly for the Navy Day celebrations. He conducted major discussions about a new level of military cooperation specifically in order to counter the US Navy threats.

At the end of the visit, Khanzadi reported in Tehran: “Iranian and Russian armed forces have signed a ‘classified’ deal to expand cooperation through a series of projects, one of which will be joint military drills in the Persian Gulf before the end of the year.” “Some articles of this agreement are classified, but overall, it is aimed at expanding military cooperation between the two countries.”

Khanzadi termed the new agreements a “turning point” in the “military-to-military ties between Iran and Russia”. The agreement includes Russian-Iranian joint naval maneuvers to be held in the northern part of the Indian Ocean and in the Strait of Hormuz before the end of 2019. A major part of the classified agreement concerned giving the Russian Navy base-level installations in the Iranian Navy facilities in Chabahar, Bandar-e-Bushehr, and in the Strait of Hormuz (Bandar-e-Jask and/or Bandar Abbas).

The Russian Navy would also be able to use a Naval Aviation airbase near Bandar-e-Bushehr. In addition to technical, logistics and communications personnel, Russia would keep in these bases SPETSNAZ detachments for both local security and the ability to help Russian and allied ships in distress in the Persian Gulf.

On August 3, 2019, Khamene‘i’s closest aides conducted sensitive talks with a secret delegation of Russian officials. Tehran wanted to ascertain the Russian reaction to a US attack on Iran in case of a major escalation. “[An] attack on Iran would be an attack on Russia,” the Russians stated without equivocation. Hence, Khamene‘i formally approved and ratified the new agreements with Russia on August 4, 2019. Khamene‘i also authorized follow-up high-level discussions in Moscow about jointly implementing the Russian “proposed security plan for the Persian Gulf”, while adapting it to the new agreement with the PRC. The first rounds of discussions took place on August 6-7, 2019.

Russia, it was clear, had no problem with the new PRC rôle and stature in the Persian Gulf.

Meanwhile, the continued contacts with Washington reinforced Tehran’s conviction that a major confrontation in the greater Middle East remained possible despite the day-to-day cooling down of the situation in the Persian Gulf. Khamene‘i instructed better coordination of the diplomatic and military preparations for the next phase.

The new challenge for the IRGC was to up-date the contingency plans for the confrontation and war with the US and Israel under the new conditions where the US could no longer use bases in Saudi Arabia, the UAE, and Bahrain (on top of Qatar and Iraq which had long ago announced they would not permit the US to use their territories and installations for strikes against Iran). It was imperative for the Qods Force to ascertain firsthand how confident Tehran was about the new position of the Arab royals from across the Gulf.

As a result, on August 6, 2019, Qassem Soleimani met Mohammed Javad Zarif at the Foreign Ministry in downtown Tehran.

They discussed coordination of forthcoming regional crises and diplomatic initiatives. They agreed that the current dynamic vis-à-vis the US could lead to either a US capitulation and withdrawal, or to a major escalation all over the greater Middle East. Soleimani believed the latter option was more likely. Therefore, Soleimani and Zarif discussed how to better utilize the Russian and PRC umbrella to not only shield Iran against US onslaught, but to also convince the Arab states to stay out of the fighting.

Soleimani assured Zarif that “the IRGC’s Qods Force is fully supportive of the diplomatic apparatus of the country in all encounters against the US harsh policies”. In a brief photo-op, Soleimani addressed the newly-imposed US sanctions on Zarif, and “congratulated the Foreign Minister on becoming a target of the US anger and animosity because of [his] affiliation with [the] Leader of the Islamic Revolution Ayatollah Sayyed Ali Khamene‘i”.

In early August 2019, the Gulf sheikhdoms and Saudi Arabia agreed to seek and accept the PRC umbrella as proposed to them, and so notified Beijing. According to the plan, the PRC would provide an overall umbrella capable of containing and restraining the US, while Russia would join China in calming down Iran and ameliorating threats to the Arabs.

Among the Arab leaders involved, Mohammed bin Zayed was the most enthusiastic and active in embracing the new regional order which was effectively anti-US. Mohammad bin Salman followed, but somewhat hesitantly. MBS was afraid to acknowledge the collapse of what he had perceived to be his close personal relations with the upper-most echelons of the Trump White House: that is, Trump and Kushner.

On August 6, 2019, the PRC Ambassador to Tehran, Chang Hua, delivered the decision of the Forbidden City to play the active and leading rôle in the establishment of a new regime of collective security in the Persian Gulf.

Beijing was convinced, he stated, that “any projects and initiatives that aim to strengthen security in the Persian Gulf must be proposed and carried out by the regional countries themselves”. Chang Hua explained that “the Chinese side, as President Xi Jinping has said, is hopeful that the Persian Gulf will remain a region of peace and security”. The PRC was ready to actively contribute to the sustenance of peace and security in this crucial area. “The Persian Gulf and the Strait of Hormuz are the most critical channel and gateway in the world for transferring energy; therefore, they are significant for the world’s policy-making, security and economy,” Chang Hua concluded.

The PRC also started to implement specific undertakings.

First came the decision to increase the importation of Iranian oil, not only to help an ally in distress, but also as an affront to the United States. According to PRC senior officials in Beijing: “China continues oil imports from Iran to show independence from US sanctions.” The PRC also agreed to purchase oil with yuans, euros, and other currencies in order to reduce their vulnerability to US financial sanctions. The PRC would continue to import its Iranian crude via at least a dozen Iranian tankers also in order to demonstrate to all that “China [is] a country powerful enough to bust US sanctions”.

Moreover, the anticipated large-scale PRC imports of Iranian crude would have a major impact on the price of oil. Experts in the US and Europe concluded that under such circumstances, the oil price could sink by as much as $30 a barrel. The experts worried that the PRC might decide to purchase large quantities of Iranian oil as a retaliation for the trade/tariff war with the US.

“This decision would both undermine US foreign policy and cushion the negative terms-of-trade effects on the Chinese economy of rising US tariffs,” concluded a Bank of America Merrill Lynch Global Research report. Significantly, the original price estimate discussed between the US and Saudi Arabia was $60 a barrel. That estimate was based on the idea that increased Saudi and US oil production would fill the gap created by the imposition of the US sanctions on Iranian oil. But the PRC commitment to buying more Iranian oil invalidated this plan. Thus, while the UAE was willing to accept such a price drop as a necessary evil needed to prevent a calamitous regional war, Saudi Arabia was furious, given its financial woes which the oil price hike could have eased.

Meanwhile, also on August 6, 2019, the PRC Ambassador to the United Arab Emirates, Ni Jian, formally informed Abu Dhabi that, should there be a deterioration in the security situation, the PRC’s PLA Navy would start escorting tankers and other commercial vessels in the Persian Gulf. “If there happens to be a very unsafe situation, we will consider having our navy escort our commercial vessels,” Ni Jian stated.

Officially, Beijing did not rule out coordination with the US-led initiative to escort tankers through the Strait of Hormuz. However, given the PRC commitment to buying and shipping Iranian oil that the US initiative was intended to prevent, the prospects for PRC cooperation would probably be nil. Ni Jian emphasized the PRC support for regional security arrangements and regional negotiations of the type the UAE has with Iran. “We have the position that all disputes should be sorted by peaceful means and by political discussions, not … military actions,” Ni Jian concluded.

Beijing’s agreeing to assume a major, and, for the PRC, unprecedented, rôle in the Persian Gulf comes at a crucial time for the PLA.

On July 28, 2019, the PRC issued a major White Paper titled China’s National Defense in the New Era. The document constituted an authoritative statement regarding the PRC’s military reforms and strategic aspirations under the leadership of Xi Jinping.

For the first time, an official PRC defense document acknowledged the rivalry with the US military and clearly articulated China’s long-term goal to confront and challenge “US dominance”. These goals would be attained through, among other things, the expansion of the PRC “power projection capabilities”, particularly the Navy’s. The White Paper heralded a significant shift in maritime strategy from “near seas defense” to “the combination of near seas defense and far seas protection”. Adopting the “far seas” strategy, the White Paper stated, would enable the PRC to “build itself into a maritime power”.

Xi Jinping’s longer-term objective was for the PLA to become a global force. With the new rôle in the Persian Gulf, Xi Jinping’s PRC was taking a major step toward attaining this goal.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

38 comments

  1. skippy

    Silk road and Maritime trade route, sounds positively 17-18 hundreds net work adjustments.

    My empire for a standardized cannon ball thingy …

    Reply
  2. haydar khan

    “They discussed coordination of forthcoming regional crises and diplomatic initiatives. They agreed that the current dynamic vis-à-vis the US could lead to either a US capitulation and withdrawal, or to a major escalation all over the greater Middle East. Soleimani believed the latter option was more likely. Therefore, Soleimani and Zarif discussed how to better utilize the Russian and PRC umbrella to not only shield Iran against US onslaught, but to also convince the Arab states to stay out of the fighting.”

    A lot of focus on the Arabs but only a brief mention of the Israelis. I suspect this is why Soleimani believes escalation is likely: the Israelis are the main driving force pushing the U.S. take out Iran. My question: How tight is Adelson and Netanyahu’s grip on the strange orange man?

    Reply
    1. Anarcissie

      ‘How tight is Adelson and Netanyahu’s grip on the strange orange man?’

      I think the refusal to retaliate against Iran for shooting down a drone has already given an answer to this question. If my guess is correct then we can expect a new outbreak of the wars between the Deep State and the various populist factions now gaining ground. It seems the folk are tired of the burdens of empire in spite of being propagandized by their betters day and night. Better watch out for another major terrorist attack, I suppose.

      Reply
      1. Amfortas the hippie

        before reading this, i was in mom’s kitchen doing step 3 of spaghetti sauce, and(as usual) msdnc was on.
        i was only partially paying attention to it, but the foreign policy stuff they were talking about had the vibe and feel of the second bush era….as if the usa is still the hands down top dog, and those silly afghanis and iraqis and iranians are unreasonable and of no consequence.
        one analyst seemed to think the potential pullout from afghanistan was just trump being trump and of course it wouldn’t happen like the afghans wanted it to.
        again, just a portion of my awareness was on all that.
        it seems clear that those talking heads haven’t read this.
        fixing to go back for the next phase in spaghetti sauce production, and will attempt to pay more mind to what the Machine wants us to think.

        and…this little quote stuck out, for me:”Overall, according to sources in these areas, the US was increasingly perceived as an unpredictable, disruptive element.”
        somehow, i don’t think that this perception is a new development,lol.
        it’s just that now, iran, uae, and russia and china have found their stones…per alastair crooke the other day.

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    2. Susan the other`

      This is pretty amazing stuff. Thanks to Lambert we get a link… long read however, and I also noticed there was no word whatsoever about the Israelis. I assume therefore that the plan to equip Israel with an oil refining industry, maybe a natgas liquifying plant too is still planned. With everyone backing off of their belligerence in the ME, it’s possible that an oil pipeline could be built to run both from SA and Iran. If that is still the Israeli plan. Anyway I liked all of the above. Because it shows how ultimately sane we can all be.

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      1. timbers

        Because it shows how ultimately sane we can all be.

        That really jumped at me, too!

        When confronted with increasingly balanced / multi polarism vs the previous sole Superpower-hegemon of all powerful USA, even the Saudis paused to reconsider their actions and alter their course by considering more rational actions to avoid war and destruction.

        Maybe the whole concept of “rational self interest” can not work when there is but one single Superpower…while in a multi polar world, it begins to work.

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        1. Spoofs desu

          That is my take as well; if you look at the geopolitics from a game theory/cost-benefit perspective, we don’t really go to war against any reasonably large professional armies that have any amount of hardware to project force anywhere outside their borders. (Vietnam was supposed to be a pice of cake in the early/mid 60’s but somebody obviously dropped the ball on that one)

          The immediate above describes a scenario where wars budgets are maximized and cost to those doing the implementation is minimized. Iran does not fit that scenario, regardless of chinese and russian support. This extra support is just a capper for “there will be no war”.

          So, back to your point, i guess we are at least some what rational/sane but perhaps not so moral.

          Reply
  3. Kurtismayfield

    The handling by the Trump White House of the Iranian shootdown of the US RQ-4A/BAMS-D Global Hawk drone on June 20, 2019, only exacerbated further the anguish of both MBS and MBZ. Both of them, along with other Arab leaders, urged the Trump White House to strike hard at Iran in retaliation. Both MBS and MBZ communicated in person with the most senior individuals at the White House. They were stunned to learn that Trump communicated directly with Tehran on the possibility of a largely symbolic retaliatory strike, and the prospects of bilateral negotiations.

    This is one of the reasons that Trump was elected instead of HRC. Instead of taking the immediate military response, he aimed for negotiation.

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  4. Schmoe

    It is bizarre that Qatar was the one country/sheikdom in the Gulf that openly stood by Iran, if only because of the idiotic Saudi attempted embargo of it, while at the same time Qatari funded mercenaries in Syria fought Iranian backed Hezbollah forces there. As bizarre as Russia sending S-400s to Turkey last month and Turkish-allied militants shelling a Russian observation post in Syria yesterday. Also, maybe Qatar’s importance to the US is its regional support for Iran.

    China’s largest oil company backed out of a large Venezuelan crude purchase last week and it will be interesting to see if they continue to violate US sanctions on Iran.

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    1. PlutoniumKun

      Qatar’s giant gas fields are shared with Iran – they are located right in the middle of the Gulf. Nobody knows what sort of deal the two countries have have, but its pretty clear that Qatar can never join an anti-Iran coalition, there is too much money at stake.

      The reason I suspect that they are on opposite sides in Syria comes down to timing. Qatar supported Sunni groups in Syria hoping for a quick victory – this was before Hizbollah and Iran got fully involved. But once it was clear that this wasn’t going to happen, they seem to have been the first of the Gulf States to withdraw support, most likely ‘encouraged’ by Iran.

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    2. Simon Price

      If China buys oil from Iran and the oil price falls as a result it is good for world economy but maybe not for US frackers. I’ve heard the economies of Iran and Russia are not very healthy so while both largely command economies do they have the military assets in good enough condition to realistically threaten US hegemony in the region? Trump could checkmate Iran and Russia by doing a trade deal with China where as a cheap concession in return for removal of tariffs, China ceased support for Iran. No wonder MBS is equivocating.

      Reply
      1. Schmoe

        But China would be totally at the mercy of Trump if he broke that deal (speaking theoretically, of course).

        MBS seems to, at best, be a bit of a lunatic and if push came to shove, he would obey US orders to cut off China. That would leave China with only Russian oil, as regards sources not under US control or that must transit the Persian Gulf. This assumes Venezeula falls to Trump after the embargo, but Trump could impose a naval blockade of them. I would view that as virtual suicide for the communist party since Trump could tell them to either disband the party and crawl on their ahnds knees and lick his feet, or they need to cut their oil usage by 50% immediately and their economy instantly enters a Great Depression and all CCP party leaders would probably be hanged.

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  5. Samuel Conner

    I found the OilPrice article on new security architecture in the Gulf to be helpful (and a bit encouraging; I suppose that Zbig’s fellow-travelers may be displeased that the “arc of chaos” may in near future become a bit less chaotic).

    The headline, however,

    “China’s Ultimate Play For Global Oil Market Control”

    seems over-wrought, however, Perhaps it’s just click-bait.

    I though US was now the swing producer.

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    1. Ian Perkins

      The title may be a bit overwrought, but
      “the anticipated large-scale PRC imports of Iranian crude would have a major impact on the price of oil. Experts in the US and Europe concluded that under such circumstances, the oil price could sink by as much as $30 a barrel.”
      If that turns out to be the case, wouldn’t much US oil extraction become unprofitable, changing it from a swing producer to a minor player?

      Reply
      1. Elrond Hubbard

        Shale is already deeply unprofitable and always has been. Big-dollar investors like pension funds have continued funding it due to (a) hype and (b) lack of alternative putative sources of return, but it’s finally starting to sink in that shale has no future.

        If the bubble doesn’t pop by itself, a Chinese end-run would likely do so, thereby ratcheting the stakes up in the Middle East that much higher. Then we’re back to Soleimani’s “latter option”.

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  6. John k

    Different take from MOA, particularly re Russians stationed in Iran… which none may call bases…
    None of this in msm… but of course, this is news…
    Msm is reporting Iran oil trans shipped between tankers to bust sanctions… but if China takes large, say 2 million b/d, can’t be hid… what will us do? Probably not much if in China ships. More tariffs?

    Reply
  7. Synoia

    How much of this is concrete fact, and how much speculation or inference?

    The rerence to arab leaders actions as concrete posisions is very questionable, and would require much inside information to be fact as opposed to speculatio.

    Does the author and punlisher have an axe to grind?

    Reply
    1. DD

      This was my thought as well. It seems so concrete and certain that I actually wondered if it was a “what if” piece, rather than actual analysis. How functional can a ‘mediated’ peace be if the major players are still supporting insurgencies and proxy wars aimed at each other? Or are we to believe the whole Sunni/Shiite thing is a misunderstanding?

      Reply
      1. ChrisPacific

        I didn’t quite know what to make of the direct quotes from ‘secret’ meetings. There is no sourcing, so we don’t know whether the author is impressively well connected or if it’s all a plausibility argument constructed on the basis of available facts.

        Absent further evidence I’d be inclined to treat this as a chronology of publicly verifiable events together with a possible interpretation of the context. The distinction isn’t always clearly drawn in the piece. Looking at this, for example:

        Then, on August 5, 2019, the US Ambassador to Iraq, Matthew Tueller, dropped the bomb.

        “We have direct communication channels with Tehran,” he acknowledged. And these are not simple channels. While diplomatic discussions and de facto negotiations are taking place via the good services of Doha, the back-channel in Baghdad was specifically with the Iranian Revolutionary Guard Corps’ (IRGC: Pasdaran) Qods Force. These contacts were aimed to minimize the likelihood of clashes and misunderstandings in Syria, Iraq, Yemen, and the Persian Gulf. This venue was most logical because the local Iranian Ambassador is Brig. Gen. Iraj Masjedi who is the right-hand man and deputy of Qods Force Commander Maj.-Gen. Qassem Soleimani.

        I can find only one corroborating source for this, an article on Asharq Al-awsat (I’m not familiar with it, but it’s apparently an Arabic newspaper run out of London that tends to take a Saudi viewpoint). According to that source, Tueller confirmed the existence of a direct channel in a media briefing but “didn’t reveal the nature or level of such communication.” That’s not the impression I would have received from the quote above, and it’s unclear whether the additional detail is supposed to have come from.

        Reply
  8. PlutoniumKun

    Very interesting article, although the final section seems to contradict the overall thrust of the argument. If the Saudi’s and UAE are genuinely supporting a Chinese initiative for the Gulf there is no way they would accept large scale Chinese purchases of Iranian oil. They would see this as an extremely hostile act – unsurprisingly as if oil did go down to $30 a barrel it would be devastating for both countries. There is no way they would do any sort of deal with China allowing its influence over the Gulf unless it was linked to China switching to SA from Iran as its major oil supplier. For all the disenchantment they have with the US, there is no way they would switch to China/Russia if they thought that both favoured Iran when it came to security and oil purchases.

    Reply
    1. mpalomar

      “If the Saudi’s and UAE are genuinely supporting a Chinese initiative for the Gulf there is no way they would accept large scale Chinese purchases of Iranian oil.”
      From the article:
      “Thus, while the UAE was willing to accept such a price drop as a necessary evil needed to prevent a calamitous regional war, Saudi Arabia was furious,”

      Hard to reckon that passage with the conciliatory MBS cited earlier in the article unless SA and Iran have rather unbelievably come to terms as suggested.
      Perhaps the illogical and destructive game the US, Israel and Saudi Arabia have been playing in the region has finally succumbed to geopolitical contingencies.

      They’ll trade their old umbrella for a new umbrella with a matching belt and road.

      Reply
  9. Dan

    “Thank you for your service…”

    Chen Aizhu, Rania El Gamal – August 28, 2018
    China close to a deal with Iraq for more crude
    Beijing/Dubai – Iraq’s state oil marketer SOMO is close to a deal with China’s state-run Zhenhua Oil to boost the OPEC member’s crude oil sales to the world’s top oil importer, four sources with knowledge of the matter said.

    http://www.themeditelegraph.com/en/shipping/2018/08/28/china-close-deal-for-more-iraqi-crude-r1ayKak1yNiIxAH5bNqKJK/index.html

    Reply
  10. marku52

    “Saudis — reflecting the persona of MBS — were risk-averse ”

    I have a little trouble calling Mister Bone Saw risk averse. This is the guy that bought an umpteen million dollar yacht on a whim, started a totally pointless and reckless war in Yemen, and killed a US resident and prominent journalist, all apparently just because he felt like it

    Still hard to miss that the rest of the world increasingly sees the US as a stumbling drunken giant with dementia, and that it is critically important not to be underneath when he stumbles and falls.

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  11. Susan the other`

    How the world oil market breaks down in the end will be that ME oil is sold primarily in China, the ME, all the Stans, India, Indochina, SE Asia, North Africa, the Mediterranean, and much of the EU. Russian oil will go to northern China, and northern Europe, Japan and Korea – basically all points north; African oil will go to sub Saharan Africa, maybe France; Venezuelan oil will go to the Americas. No? So ME oil will go to 2/3 of the world’s population. How else can they divvy it up? Especially if they are gonna do all those pipelines.

    Reply
  12. VietnamVet

    This article signals that chaos continues to expand. The Global-Cons primary objective is the destruction of nation states and resource confiscation. Eighteen years later, American troops occupy Eastern Syria, Afghanistan, and Iraq. Israel and Saudi Arabia are the only allies left. Now, it is down to one, Israel. Factions of Oligarchs are fighting over the withdrawal of American forces, or not, with the only goal of increasing one’s wealth. Halloween is coming. At first glance the Chinese/Russian seizure of Persian Gulf Oil seems hyperbole. Petroleum is supposed to be fungible. But, still, the Hong Kong riots and Brexit seem to be related in a increasingly turbulent world. This is becoming existential. Along with climate change, unless a way is found to cooperate, there will be no next generations.

    Reply
  13. DHG

    China never becomes a dominant world power, the US/UK world power goes to its destruction as do all other nation states at the hands of Gods Kingdom a fully functional empire. This should indicate to you how quickly there is going to be a change of rulership here on Earth.

    Reply
  14. Goat Farmers of the CIA

    The post’s author makes some claims that can’t be verified, though most of them may have some basis in reality (e.g.: MBZ’s visit to China’s Xi last month). But I can’t find any official support for this one:

    There can be expected to be growing demands from Tehran to empower the Shi’ite population of the eastern Arabian Peninsula — where all the oil and gas reserves are located — in accordance with Iran’s long-term commitment to the establishing of an Islamic Republic of Eastern Arabia.

    In fact the only reference to it comes from alternative history pages in the website Fandom. Also, the guy has a checkered history that can easily be found in his Wikipedia bio, which is relatively well sourced. Most of it has to do with making reports for a Congressional House Task Force without a single source, in support of Islamophobic scare stories trashing Muslim Bosnians.

    Again, though I wouldn’t write off everything he writes as propaganda for some obscure interest group, I would handle it with care…

    Reply
  15. philnc

    Ah, ISSA. One time benefactors of Cap Weinberger, among others (see wikipedia page). Web site is straight HTML, but from the turn of the century. DOCTYPE HTML 4.0 Transitional? Windows 1252 character set? Was this composed in MS Word? Love the CD-ROM graphic in the lower right corner of the front page advertising their 18th edition “Defense & Foreign Affairs Handbook”. The “Join” button has Rummie’s face on it. At least the mix of fonts and colors on the subject “Special Analysis” doesn’t include comic sans. Try their search engine and you’ll get “You have called the PicoSearch site search service from a website which is incorrectly still using it. The PicoSearch service was closed on July 1, 2014 and all webmasters were notified. “. Damned inconvenient for mobile users that it isn’t responsive. Also not sure what we should make of a org with “Security” in its name whose site isn’t published over HTTPS. As the as ever insightful commentariat note here, the lack of citations to actual verifiable sources speaks volumes. Kind of reminiscent to the kind of schlock intel reports that Chalmers Johnson used to ridicule so mericlously. just as I have just done to their web infrastructure. To be serious for a moment though, highlighting this sort of report is useful in that it uncovers the sources of neocon provocation that have been driving US foreign policy for too long.

    Reply
  16. Beir Bua

    It is impossible for the Houthis to send a missile from Yemen to Dammam- check your atlas- it is a distance of more than 1,000 miles

    Reply
  17. elkern

    Damn, I was hoping it was all true. Then I checked out the author. Long history of bad fiction, long history of neo-con links. His prior “work” is consistent with the lack of references to Israel in this piece.

    Reply
    1. MyLessThanPrimeBeef

      My first reaction is, why would any (green) nations rush to go there?

      With more Green Deals globally, the world can inch closer to being fossil fuel free.

      Reply

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