Saturday, February 18, 2012

China to import a lot more oil from Iran and the Arab world profoundly changing the geopolitics....

China to import a lot more oil from Iran and the Arab world profoundly changing the geopolitics....

Two of the biggest news stories of the week have been growing tensions between Iran and Israel, and Chinese Vice President Xi Jinping’s five-day tour of the U.S. to bolster relationships between the two nations, which have taken a hit in recent months due to trade and currency posturing. While there’s been plenty of commentary on both issues, these two stories are crucially related in a way that most of the press hasn’t explored.

U.S.-China relations are tense because Americans are worried that China is eating their economic lunch – in a 2011 Gallup poll that asked Americans to identify the world’s leading economy, 52% said China and only 32% cited the U.S. China’s economy is still only a third the size of the U.S economy, and its average income is only a tenth that of America’s, which is a measure of the paranoia about the rise of the Middle Kingdom.

China is rising fast, of course – huge growth in the Middle Kingdom is one reason that oil prices have been so high over the last several years. It’s no accident that China, along with petro-power Russia, has made it difficult to impose sanctions against Iran, which continues to pursue a nuclear program, creating a tense standoff with Israel. Just yesterday, Dow Jones reported that China’s big state oil company, Unipec, signed a deal to buy crude from the National Iranian Oil Company for the remainder of this year. Don’t think for a minute that China is going to let U.S. sanctions keep them from meeting their energy needs.

And those needs are growing. The recently released Energy Outlook report from BP predicted that by 2030, China would very likely become increasingly reliant on foreign oil, importing up to 80% of its needs, much of it from the Middle East (ditto India, which will import over 90%). Meanwhile, the U.S. could become almost entirely energy independent during the same time period, as the country expands its own domestic natural gas production (via fracking, which many experts believe will become environmentally acceptable as technology improves) and the importing of more oil and gas from Canada. It’s a trend line that will continue with or without the Keystone Pipeline. “You’ve got a Western Hemisphere that by 2030 may not be importing any oil from the Eastern Hemisphere,” says Daniel Yergin, the Pulitzer Prize-winning oil expert whose new book, “The Quest” explores energy security.

All this has profound implications for the geopolitics of the Middle East. China isn’t interested in Israel the way that America has traditionally been – they are interested in as much cheap oil as they can acquire in the region. China also has a tendency of not caring much what kind of regime it works with – as long as it can use them to meet its energy needs. Witness the continual deal cutting with Iran and how it will insert itself into the sectarian politics of the region. And any new regime in Syria (especially one that is less friendly with Iran) is up for grabs. The bottom line is that China’s economic growth isn’t just a challenge for the U.S. – it’s a total game-changer for Middle Eastern geopolitics....

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