Consider the severe economic body blows to China in the past 14 months.
♦ First blow, the Trump tariffs hit Beijing hardest. ♦ Second blow, the Beijing tentacle on the Panama Canal is severed. ♦ Third blow, global tariff threats changed the risk dynamic for southeast Asia countries who acted as transnational shippers for China. ♦ Fourth blow, cheap sanctioned oil from Venezuela was cut-off. ♦ Now, the fifth blow; cheap, sanctioned Iranian oil is disrupted.
It’s not just a factor of oil flow, but also the price that China will ultimately end up having to pay. Beijing was buying oil from Venezuela, Iran and Russia at steep discounts because their purchases were skirting western sanctions.
With Iranian oil production now no longer a market option, China will seek to replace their needs with more Russian alternative. However, that diversion means the oil India was purchasing from Russia will come at a higher price, and the refined final product that was exported by India will arrive to the European Union carrying an additional cost.
Simultaneously, Vladimir Putin was asked about Russia’s lack of military support to Iran in response to the U.S. military action, to wit the Russian president noted the technical terms of their joint military agreements did not include Russia’s immediate involvement. In shorthand, Russia is busy and is not getting involved.
Russia was/is partially dependent on receiving military supplies from Iran in exchange for oil transfers. The military component is reported to include drones from Iran for use in the Ukraine conflict. Now that exchange profile is shuttered.
Taking Iran’s malign influence off the geopolitical chessboard is beginning to surface in major challenges to the BRICS assembly (Brazil, Russia, India, China, South Africa). Russia, China and India are impacted directly.
The BRICS nations were skirting western oil sanctions by trading the commodity outside the petrodollar structure. However, President Trump now controls the flow of oil from Venezuela, and his administration controls the currency in which it is sold.
With Iranian oil removed from the non-petro supply chain, the only remaining non-petro oil producer is Russia – who is simultaneously hit with a loss in military hardware support. China may end up as a larger oil customer to Russia, but at what price and in what payment structure.
With global oil supplies in a state of flux, and with the USA in control of the oil flow from Venezuela, North America is certainly in the best position for minimal energy disruption.
Asia is heavily dependent on oil flows through the Strait of Hormuz, and the majority of Europe has already shut themselves off from Russian oil production, putting themselves in a position of dependency to the global markets. The short-term ramifications of this oil disruption hit China, Southeast Asia, Japan and Europe particularly hard.
American Buddhist Net 