As 21WIRE reported previously, China is now the Gulf’s number one customer – a fact which will have massive geopolitical ramifications going forward. Being the biggest buyer mean that china has considerable leverage – and that’s economic and political leverage which the US and its NATO partners may never recover. This also does not bode well for the continued domination of the US dollar’s reserve currency status either.
Chinese oil refineries, led by Asian heavyweight Sinopec, are going full-speed, working overtime to power China’s growing energy requirements. to replace some of the Saudi Arabian supply it cut after the kingdom hiked prices, industry sources said.
They are now the world’s top crude importer, booking in millions of barrels per day from the Middle East, Russia, and Brazil.
While Russia remained as China’s second-largest source of crude oil in 2022, their top supplier is still Saudi Arabia. The Chinese refiners have been snapping up low-cost Russian barrels while Western countries been trying to choke-off potential oil markets for Russia with sanctions and other embargo tactics.
Thomas Lifson from American Thinker writes…
It’s hard to overstate the potential impact of a move underway that — thanks to Biden’s catastrophic diplomacy — could result in China replacing the U.S. as a security guarantor with the petro-monarchies that control so much of the world’s oil reserves.
Bloomberg reports:
Oil-rich gulf monarchies are leveraging their wealth to deepen ties with China amid anxiety about the future of their longstanding security partnership with the US.
Seven months after President Xi Jinping participated in the first China-Gulf summit in Riyadh, economic exchanges between the world’s second largest economy and nations like Saudi Arabia and the United Arab Emirates have been accelerating — moving well beyond crude purchases where Beijing has been dominant for years.
One of the deals that could benefit from closer ties in the coming months is Chinese-owned seed giant Syngenta Group’s planned $9 billion Shanghai IPO. The state-backed company’s advisers have been having discussions with Middle Eastern sovereign funds including the Abu Dhabi Investment Authority and Saudi Arabia’s Public Investment Fund about becoming cornerstone investors, people with knowledge of the matter have said.
The value of acquisitions and investments by Gulf companies in China has climbed more than 1,000% year-on-year to $5.3 billion, according to data compiled by Bloomberg.
For decades, the oil states of the Middle East have relied on the United States as their primary economic partner and security guarantor. Their holdings of dollar-denominated U.S. debt and settlement of sales contracts in dollars keeps the dollar as the world’s reserve currency. That status enables to U.S. to run massive deficits, print money to pay for them, and not suffer a foreign exchange crisis and severe devaluation.
China is currently suffering economic doldrums, probably in a recession with high youth unemployment, and the loss of markets and manufacturing investment as the U.S. and Europe are decoupling from the Chinese economy. But the petro-monarchies, with their massive resources and substantial markets, could at least partially replace the Western powers and relieve domestic political pressure on Xi Jinping to behave himself better on the world stage.
Make no mistake: these economic considerations have a direct bearing on strategic military relations. China would make every effort to leverage its increased economic and financial ties into deeper military relations, including the opening of military bases and a larger diplomatic, cultural, educational, and media relationship. The ultimate aim would be the displace the United States as the strategic guarantor for the monarchies that control the export market for oil.
Biden’s virtue-signaling demonizing of Crown Prince Mohammed bin Salman over the Khashoggi assassination set off this decline in U.S. influence. It had no upside. Of course, killing and chopping opponents into pieces in a diplomatic enclave is deplorable, but great nations that aspire to be hegemonic learn to tolerate allies with less than spotless records. Heck, we allied with the USSR when fighting Hitler.
Now, with U.S. military readiness declining; our conventional ammunition stocks depleted; and our military leadership focused on diversity, abortion access, and transsexual rights, we look like a declining force. Who would want to bet his own regime’s stability on an alliance with such a weakening and decadent power?
The Saudis are not going to change their ways and will be ruthless in protecting their regime. Many other nations see the U.S. as equally ruthless, rightly or wrongly. The U.S. gained nothing except flattering commentary at home from some quarters when it went after MbS over Khashoggi. Now relations are spiraling downward, and the logic behind that spiral extending and amplifying is substantial. China and the Gulf monarchies have complementary strengths and needs.
With China the dominant power in the Middle East, if this keeps up, the world’s power structure will be very different, and China will call shots that a poorer and weaker U.S. will have no choice but to accept.
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