China Update: Seizing Advantage from Strategic Lame Duck

Bloomberg reported that Iraq is prepared to enter a multi-billion dollar energy deal with China similar to that China made with Russia several years ago that culminated in the Siberian pipeline to China. These prepaid oil for financing deals are tools China uses to decouple its energy needs from U.S. domestic sources while gaining influence over emerging nations adverse to the U.S. and democracy’s allies.

China’s deal with Iraq would not burden Iraq with interest on the financing, but would impose opportunity cost as to the supplies spoken for if prices otherwise went-up. And this makes one wonder if China is expecting prices to rise with possible unrest or war in the Middle East. Vaccine-related recovery would be enough reason to expect oil prices to rise, but Iraq’s increasing ties to Iran and Iran’s uranium enrichment, together with other rivalries, raises the war risk.

Whatever the energy price factors, the Beijing’s no-interest financing deal with Iraq looks less economic, and more like a pretext for military deployment to the fertile crescent to protect “vital national interests” with enhanced strategic control over Middle East oil and gas supplies. In seizing leverage over desperate OPEC+ players with massive proven global oil and gas reserves such as Russia, Iran, Iraq, and Venezuela, China establishes a “vital interests” argument for military expansion. The Trump Administration policy of keeping oil and gas cheap helped create the desperation in OPEC+ members that opened the door to Chinese expansion.

Few if any working at U.S. foreign policy in Iraq over the past thirty years would say that the aim of it all was to prepare Iraq to take on China as a long term creditor with negotiating leverage to go with it, while Russian sovereign energy companies take more contracts for development, transport, and processing of oil and gas.

One can say this is where isolationism leads, true. But that is secondary to the whipsawing partisan and autocratic political warfare inciting internal U.S. political divisions making U.S. foreign policy too bi-polar to prevail over autocratic foreign policies with continuity over time. Which brings us back to the need for unifying, not divisive, leadership in the United States if we are to compete successfully in world markets to help keep future generations of Americans independent.

War history indicates that aggrandized energy supplies are crucial elements of war power, so that supplies through contiguous friendly lands increases energy security for the power which can achieve it. Such supplies are easier to defend closer to home. Iraq and Iran would be contiguous energy pipeline candidates if Afghanistan came under China’s influence. Will Afghanistan be China’s next Belt and Road Initiative debtor target should the United States drop-out of a supporting role?

As China and Russia move into financial and energy patrimonies across OPEC and other lands, their strategic oil and gas supply gains will be one more instrument of power supporting both China’s and Russia’s militaries.

The company selected for final bid authorization? ZheHua. Per Bloomberg, a brief description is instructive:

“ZhenHua produces and trades oil. The company has played a large role in Beijing’s so-called “going global” policy for energy. It has invested in oil concessions in the United Arab Emirates, Kazakhstan and Myanmar, and trades crude originating from the likes of Kuwait, Brazil and the Republic of Congo. The company was founded in 2003 as a subsidiary of the largest Chinese state-owned defense contractor, known as Norinco. According to its website, ZhenHua trades about 1.3 million barrels a day of oil and finished products.”

Sustainable and adaptive U.S. foreign, energy, trade, defense, and security policy recommendations are due for an upgrade, much of the creation and vetting of which should be offline topics.

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