Page 5 - AsianOil Week 37

AsianOil ASIA-PACIFIC AsianOil
remain well supplied and Iran is held account- able for its aggression.”
That same day US President Donald Trump said the US was “locked and loaded” to respond once the culprit had been verified.
China has historically preferred a non-inter- ventionist approach to international relations, having frequently teamed up with Russia to sty- mie US efforts on the UN Security Council to introduce new sanctions against Iran and North Korea. Thus this move calling for restraint fol- lows an established trend.
Beijing, however, is set to lose hugely if the US decides it has enough evidence to launch a series of strikes against Iran.
Ties that bind
Iranian Ambassador to India Ali Chegini last week reportedly confirmed that China had agreed to invest $280bn in his country’s energy sector. Indian financial daily the Mint cited Chegini as making the comments, which confirmed an earlier report by the Petroleum Economist, during a speech to the Indian Association of Foreign Affairs Correspond- ents on September 10.
In exchange, Chinese companies are reportedly set to be prioritised in oil and gas project tenders in exchange for this investment. “We are ready to have the same agreement as with China, with India, maybe even more than that,” Chegini added.
Beijing has repeatedly refused to adhere to what it calls “unilateral” US sanctions on the Iranian energy sector, continuing to import oil from Iran despite a six-month waiver on US sanctions expiring on May 2. It has seized upon the enforced isolation of Iran as an opportunity to deepen its foothold in the beleaguered Middle Eastern country’s oil and gas sector.
But Washington’s aggressive position on Teh- ran will likely cut off not only supplies of Iranian oil, but all crude exports shipped via the Strait of Hormuz.
Strait and narrow
Iran has already warned this year that it is capa- ble of closing the Strait of Hormuz, a transit cor- ridor through which 40% of the world’s maritime
oil exports must sail. At its narrowest point the strait is just 21 nautical miles (39 km) wide.
The Iranian military, responding to US alle- gations in June that it had been behind attacks on oil tankers in the Gulf of Oman, warned: “If the Islamic Republic of Iran decides to block exports of oil through the Strait of Hormuz, it is militarily strong enough to do that fully and publicly.”
While Trump has boasted that the US mili- tary could reopen the strait in short order, almost two decades of US military action in Afghani- stan and Iraq have shown that the US struggles when forced to respond to unconventional warfare. The strait will, in all likelihood, remain closed for a substantial amount of time.
This would explain why sources in both Iran and Saudi Arabia told AsianOil’s sister publica- tion Middle East Oil & Gas (MEOG) that both countries were keen to defuse the situation before it erupts into war.
What’s in store
China’s leaders will be hoping that cooler heads prevail in Iran and Saudi Arabia and that a peaceful resolution can still be reached. While almost all of the members of the International Energy Agency (IEA) have reserves to cover 90 days’ worth of imports, with Australia being the black sheep of the family, China falls short.
The Asian economic giant China has not provided an official update on its storage levels since December 2017, when it had around 30 days’ worth of imports. While the stores held by the country’s extensive refining sector blur those lines, any prolonged outage will likely squeeze the country’s economy.
Saudi Aramco has promised that it will fulfil its contractual obligations and bring its full pro- duction back online by the end of the month, and China will be watching closely to see whether or not the company can achieve this. But while the oil community awaits Aramco’s status updates, it should also prepare itself for a military build-up in the region, which will be billed as an effort to avoid a repeat of this past week’s events. If that does occur, it may only be a matter of time before war comes once again to the Middle East.™
Week 37 18•September•2019 w w w . N E W S B A S E . c o m P5