Yves here. For your delectation, yet another piece from diehard neocon Simon Watkins. If nothing else, he’s a useful of indictor of a hawkish flavor or orthodox thinking. And he sometimes has good information tidbits. This piece starts with the Biden Administration latest sanctions on Chinese military concerns, which included the key oil player China National Offshore Oil Corporation’s international oil trading arm. It continues with the notion that the Trump Administration will try to derail the burgeoning economic relationship between China and Gulf States.
Hopefully readers can filter out the noise of Watkins’ jingoism for the signal of where Trump policies on China are headed.
By Simon Watkins, a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for Credit Lyonnais, and later Director of Forex at Bank of Montreal. He was then Head of Weekly Publications and Chief Writer for Business Monitor International, Head of Fuel Oil Products for Platts, and Global Managing Editor of Research for Renaissance Capital in Moscow. Originally published at OilPrice.com
Among the swathe of Chinese entities last week placed by the U.S. Department of Defense (DOD) on a blacklist of firms believed to be supporting Beijing’s military were several from its energy sector. Most notable of all, perhaps, were the China National Offshore Oil Corporation’s (CNOOC) international oil trading arm and the COSCO Shipping Corporation. As the DOD blacklist focuses on companies deemed a threat to U.S. national security, it should not surprise anyone that such Chinese firms are now on it.
As highlighted by OilPrice.com back in the first presidency of Donald Trump, a sea-change had already emerged in China’s political and economic organisational structure following Xi Jinping’s assumption to the role of General Secretary of the Communist Party in November 2012, and then to President in March 2013.
A key element of this was the increasingly pivotal role of the Communist Party in all main areas of economic and commercial management in the country. This aligned with Xi’s statement that: “Government, military, civilian, and academic, east, west, south, north, and centre, the [Communist] Party leads everything.” In practical terms, this meant that from that point board directors and company executives — including those in the energy sector — were under the standing instruction to ‘execute the will of the Party’.
And as China expert Jonathan Fenby exclusively told OilPrice.com at the time: “This political-economic nexus is set to bring growing divergence from the U.S. as part of the wider agenda of the ‘national strengthening’ being pursued by Xi Jinping.” He added: “Beijing is shifting from being an economic adversary to the U.S. to a geopolitical alternative and this could result in a step change in the nature of the confrontation between the two countries.”
President-elect Trump has long seen China as at minimum an ‘adversary’ rather than as a ‘competitor’ as President Joe Biden did, and this has not changed, according to senior sources in his first and current presidential team exclusively spoken to by OilPrice.com. Given the metamorphosis in the degree of interconnectivity in China’s political, economic and military elements during Xi’s rise in 2012/2013, Trump’s view appears well-founded. Even more so in one of Beijing’s national priority areas of securing its energy needs to power future economic growth. This is turn is used to expand its allied territories under the umbrella of the ‘Belt and Road Initiative’ (BRI), which in turn was always eventually aimed at enabling China to establish itself as a viable superpower alternative to the U.S., as analysed in full in my latest book on the new global oil market order.
A taste of what was to come for the world’s greatest repository of oil and gas – the Middle East – came in December 2022 when former key ally of the U.S., Saudi Arabia’s Crown Prince Mohammed bin Salman, hosted a series of meetings in Riyadh between President Xi and the leaders of countries in the Arab League. This expanded upon all the key themes stated in January of that year when senior officials from the Chinese government met with foreign ministers from Saudi Arabia, Kuwait, Oman, Bahrain, and the secretary-general of the Gulf Cooperation Council (GCC).
The basic theme was to forge a “deeper strategic cooperation in a region where U.S. dominance is showing signs of retreat” — in this instance centred on the signing of a China-GCC Free Trade Agreement. The new pact pledged cooperation in just about everything a country does, including finance and investment, innovation, science and technology, aerospace, oil, gas, and renewable energy, and language and culture.
Following the signing of these all-consuming cooperation agreements, Xi then identified two priority areas that he believed should be addressed as quickly as possible: first, transitioning to using the Chinese renminbi currency in oil and gas deals done between the Arab League countries and China; and second, bringing nuclear technology to targeted countries, beginning with Saudi Arabia.
On the first of these, China has also long been acutely aware that as the largest annual gross crude oil importer in the world since 2017 it is subject to the vagaries of U.S. foreign policy tangentially through the oil pricing mechanism of the U.S. dollar. This view of the greenback as a weapon was reinforced after Russia’s invasion of Ukraine and the accompanying U.S.-led sanctions that followed, the most severe of which was exclusion from use of the U.S. dollar. As the former executive vice-president of the Bank of China, Zhang Yanling, suggested in a speech in April 2022, China should help the world “get rid of the dollar hegemony sooner rather than later.”
The second of Xi’s announced priorities at that time caused equal consternation in Washington, as it followed the discovery by U.S. intelligence agencies that Saudi Arabia was manufacturing its own ballistic missiles with the help of China. Even more concerning was that the same intelligence agencies also found that China had been building a secret military facility in and around the UAE port of Khalifa.
The subsequent advance of China’s influence across the Middle East via the mechanism of the BRI and other levers had, in the zero-sum game of superpower supremacy, marginalised the influence of the U.S. and its allies in the former key cooperative states of Saudi Arabia and the UAE. It had also cemented existing opposition to it in Iran, Iraq, and Oman, among others, as detailed in full in my latest book on the new global oil market order.
Crucially for Trump’s second term as president that begins on 20 January, China has yet to fully recover economically from its disastrous three years of Covid, which is constraining its ability to reach the finish line in the superpower race. As a senior source who works closely with the new presidential team exclusively told OilPrice.com recently: “China’s finances are failing [with struggling economic growth], Russia’s military has failed [in Ukraine and Syria], Iran’s proxies have been incapacitated [Hezbollah, Hamas, Houthis et al], North Korea is on the sidelines, and now Trump is back.”
The White House’s 2017 ‘National Security Strategy’ document and the DOD’s 2018 ‘National Defense Strategy’ analysis both echoed Trump’s personal view that China had “for decades…expanded its power at the expense of the sovereignty of others,” and was “undermining the international order from within the system by exploiting its benefits while simultaneously undercutting its principles and ‘rules of the road’”.
Some of Trump’s major early initiatives in his first presidential term were also aimed at curtailing China’s burgeoning global influence by going after its ability to finance them. Wide-ranging tariffs were introduced in 2018 that covered around 13% of the value of the U.S.’s Chinese imports the year before. And sanctions were imposed on China’s telecommunications giant Huawei for its alleged connection to espionage activities and for alleged violations of sanctions against Iran.
National security implications with much broader geopolitical ramifications, then, were at the centre of these actions undertaken by the U.S., just as they were with last week’s actions against CNOOC’s international oil trading arm and the COSCO Shipping Corporation. An additional element was the vulnerability of the U.S. and its allies to breaks in the supply chain from China’s side, which Washington realised could be weaponised by Beijing in times of crisis.
Consequently, it is highly likely that a quickly-scalable ladder of consequences – tariffs, sanctions, and other measures – will be used on China and its allies for perceived breaches of what Trump’s new Presidential Administration deems acceptable policies with relation to the U.S. and its own allies. This will be an integral part of a broader new initiative to “put Beijing back in its box”, as the Washington source told OilPrice.com, and neutering the threat from its ‘Axis of Upheaval’ into the bargain.
With effective control over the Senate, House of Representatives, and Supreme Court, Trump’s new government is unlikely to encounter any significant problem in imposing both tariffs and sanctions virtually at will against any country it wants. Aside from having already stated his intention of imposing tariffs on various countries, including China, Trump has also addressed Beijing’s desire to replace the U.S. dollar, stating at the beginning of December that any moves to do so by any of the ‘BRICS’ group of countries would be met with the immediate imposition of 100% tariffs on their goods and services. The BRICS group currently comprises Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates, while Saudi Arabia said in January last year that it was ‘still considering’ the matter.
The promise of what will happen to any other country embarking on such a course of action is implicit in the statement, and Trump’s follow-up Tweet: “The idea that the BRICS countries are trying to move away from the Dollar while we stand by and watch is OVER.”
15 comments
Comments are closed.
What I like most about this post is the assumption that countries are not allowed to have relations with other countries unless it has the express permission of the US nor are other countries allowed to go into any sort of association, again without the permission of the US. Must be really hard trying to run 200 countries around the planet and having it run just so. There are a lot of people in Washington that would really like to see a trade war between the US and China and Trump is just the person to lead these efforts. But a lot has happened with China since Trump was last in office four years ago and I am detecting from the Chinese a growing sense that they do not have to put up with this crap anymore. Certainly not when a mental midget like Annalena Baerbock comes to Beijing and instructs them on what their foreign policy has to be or even Ursula herself. The Chinese know who the super power is and if Trump wants to wage a trade war against China, I would say they they are fully capable of giving as good as they get. And yet the Chinese would always be ready to sit down with Trump to make a deal but I think that Trump and his Neocon buddies are too far gone for this to happen.
I loved the pure projection of exactly what the U.S. has done for a couple of centuries onto China, conveniently ignoring that it’s not China who has positioned military bases around the globe, and has threatened, invaded and destroyed multiple countries:
“The White House’s 2017 ‘National Security Strategy’ document and the DOD’s 2018 ‘National Defense Strategy’ analysis both echoed Trump’s personal view that China had “for decades…expanded its power at the expense of the sovereignty of others,””
“China’s finances are failing [with struggling economic growth], Russia’s military has failed [in Ukraine and Syria], Iran’s proxies have been incapacitated [Hezbollah, Hamas, Houthis et al], North Korea is on the sidelines, and now Trump is back.”
If Trump and his “team” really do believe this tripe, then “completely delusional” fails to describe how out of touch with reality these people are.
This analysis from an American living in China might be off target on the other end of the spectrum, but I’d bet the ranch that it’s a helluva lot closer to describing the real situation in China:
https://theduran.com/energy-wars-tariff-wars-w-alex-at-reporterfy-live/
Russia losing the war in Ukraine?? In what alternate universe?
As far as “Iran’s proxies” — this is a bad case of premature exultation. Rumors of their demise are greatly exaggerated. Let’s check back in 90 days and see how things are going in West Asia.
VV, Ni Hao! I live in China also and was recently in the US. Americans are completely out of touch with the situation here and pretty much out of touch with the rest of the world. As I used to tell my students in Beijing, no one does propaganda better than the US
Perhaps it would be more accurate to say that no one believes propaganda better than the citizens of the US and its NATO satraps. The arguments that Western propaganda is somehow uniquely good all seem to rest on the fact that people believe it. Yet almost nobody outside NATO and the ruling classes of poor countries believes the propaganda. It’s just not credible to anyone who can think for themselves. That’s why the propagandists insist that all countries under their control impose censorship of alternative views.
Well, it used to work all around the world, but the lipstick on a pig wore out. US and its NATO satraps still believe it, beacause they fear opening their eyes it the middle of making out.
It is inciteful to note that superpower foreign policy is zero-sum (US view), whereas, as far I can tell, China prefers win-win solutions (by definition, not zero-sum). This could explain why the developing world (aka global majority) had not developed significantly under the decades of Western “aid,” but many are rapidly developing as their trade with China expands – the deindustrialization plan was for China to make the cheap stuff while pressuring downward US wages.
“It is inciteful to note that superpower foreign policy is zero-sum (US view), whereas, as far I can tell, China prefers win-win solutions…”
Really important observation, but virtually forbidden for Western economists to make. China had at least 29 free trade agreements operating in 2024, as far as I can number. Also, China allows extended no visa stays in the country for residents of many foreign countries. Then too, there are repeated trade fairs.
By “inciteful”, do you mean insightful?
I’ll just highlight one small portion –
“…in a region where U.S. dominance is showing signs of retreat” — in this instance centred on the signing of a China-GCC Free Trade Agreement. The new pact pledged cooperation in just about everything a country does…”
The US seeks to dominate and feels slighted when it can’t, while China seeks to cooperate. If you were a smaller country looking to deal with either the US or China, it’s pretty easy to figure out which one would likely be more beneficial to trade with based on the attitudes alone.
“The US seeks to dominate and feels slighted when it can’t, while China seeks to cooperate…”
The Prime Minister of Grenada travels to China and is received as though from France or the UK, meeting at length with President Xi and Prime Minister Li to work on trade:
https://fred.stlouisfed.org/graph/?g=1CRWW
August 4, 2014
Real per capita Gross Domestic Product for Grenada, Dominican Republic and China, 1978-2023
(Indexed to 1978)
This piece is so full of Western elite delusional thinking. China is still struggling after its “disastrous” response to COVID (that was the West, China maintained GDP growth throughout the period while keeping deaths way below Western levels), Russia is “losing” the Ukraine War (if one can lose by advancing and decimating one’s opponent).
China is already on a path to significantly reduce its transport-related usage of oil (EVs for light vehicles and buses, EVs and LNG for commercial vehicles) over the next decade. If needed they can always speed up that transition, as EV sales have greatly out-performed official plans. They can also build more overland oil pipeline capacity to Central Asia and Russia if needed. Chinese influence abroad is based upon it helping other nations develop and also China’s increasing strength in new technologies. One of those is EVs, with Chinese brands and Chinese production facilities proliferating around the world outside North America. The US is fighting the last (oil) war while China is winning the future ones.
Increasing oil sanctions will also greatly harm the US-Saudi relationship as it will be SA that is most affected. Will the Saudis start moving their money out of US$ and Euro banks and government debt to protect themselves against an increasingly problematic US?
If one is to believe that the preeminent issues facing the planet are the threat of nuclear war (read annihilation), and climate change ( a somewhat slower-paced annihilation), then it is simply absurd that our “foreign policy” consists of the 21st century version of gunboat diplomacy. Instead of gunboats, we use the threat of sanctions and tariffs. These neo-Cons in Washingron seem incapable of reading the tea leaves. Either we learn to COOPERATE internationally to address these threats, or we are condemned to ruin. Perhaps we are incapable of escaping our reptilian brains controlling our decision making, in which case the experiment of “human evolution” might be yet another case of a species becoming extinct.
“These neo-Cons in Washington seem incapable of reading the tea leaves”
So once upon a time, long long ago, there was the equivalent of oil sanctions today – they called them “Windfall Profits Taxes on old oil” which was differentiated from – new oil (by arbitrarily) – dating the completion of an oil well drilled on shore in the US of A.
Old Oil today could be oil produced in Russia – same concept instead of SA – and applied as sanctionable – or really anywhere in the world – merely because someone in Washington says the owner is a “bad” person.
So two guy late 70’s early 80’s were trading certificates of old oil for new oil and selling …massively and doing quite well. Their names were Pinky Green & Marc Rich – post Solomon Bros (Phillips Bros) – while hanging out in Zug. They went on to form one of the most notable commodities firms in world history and never paid (to my knowledge) the fines for……sanctions.
The greatest – most moral & honest – President of the uSA – William Jefferson Clinton – gave Marc a pardon for his business activities based upon a recommendation from his former wife – a good democrat – on his way out the door – which may or may not have been rescinded – I dont remember.
The racketeering against China goes along racketeering of Russia´s customers (buyers of Russian resources) and state-piracy from NATO. USA-NATO band is setting a mechanism against Russia similar to 17th-18th centuries British piracy against Spain. But contexts and actors are different. Russia is not Spain.
Military speaking we’ll have to see who will be faster: USA launching war on Iran or Russia securing Iran and planting nuclear weapons there. If Putin was not heading the current ruling team, Russians would bomb and shatter Israel.
That side of Eurasia is tied to the Chinese front, and unlike 19th. century when France, UK, USA were bombing Chinese coastal and river cities, these days there is an alliance stretching from Belarus to Northern Korea with a lot of people who want to see Americans bleed
Planned piracy and racketeering actions on the Chinese front are echoes of the ones on the European front. The other days USA made an attempt at destroying a key pumping station of the Turkstream pipeline in Southern Russia, with a swarm of heavy drones launched from puppet Ukraine and another swarm to hit, with a bit of partial success, oil storage facilities. To what Russians answered with strikes hitting the gas and power infrastructure near Lwow. Ukraine is running out of infrastructure, return on investment for Blackrock, Vanguard, Monsanto, etc, very fast. Important lithium mines have also passed to Russia.
Last week Belarus finally implemented the shared visa policy with Russia (holder of a visa to one country can enter the other). This was in planning and talks for a while. It took years. Obviously Belarus was weighting pros and cons relatively to EU. This autumn Belarus made a gesture by putting on hold the visa requirement for citizens of all the Schengen zone. To what EU answer was to have Poland close more crossing points, in order to make it hard for travelers planning a trip. Well, now Belarus has consolidated its tie with Russia. There were since 2022 trips from officials of Iran, China and also Northern Korea to Minsk.
Saouds: after the purge operated by Mohammed Ben Salman few years ago and the silly killing of Khashoggi, USA went all vocal against MBS with a Biden barking he would never meet with MBS. What were the “geniuses” Sullivan and Blinken thinking? They were planning the Banderist war against Russia and did not see that it would cause turmoil on the energy marking, so Saudis would be needed??? MBS and Putin together are happy as pigs in mud.
USA destroys the main Russian pipeline. Very smart. Now everybody known that Americans will destroy anyone’s infrastructures.
According ex-diplomat now blogger Bhadrakumar, India is also fed-up with US rogue actions among others the tentative blackmail operated by USA-Canada. The fact that Modi became nicer but then was betrayed with the regime change in Bengladesh, was a cold shower and Indians are now done with USA. Have finally got into serious talks with China around their territorial dispute. The popular idea that Russia/USSR stood always by the side of India, and specially the anecdote about USSR navy impeaching a joint USA/UK attack of India in the 1971 at the time of India-Pakistan war, often stamped as fake by Anglo-Saxons, is still strong ( https://swarajyamag.com/world/december-1971-when-the-us-sent-its-naval-ships-into-bay-of-bengal-and-ussr-responded ). India still stands to its non-aligned posture, just more aligned on the Eurasian block.
Back to China: they didn’t appreciate much the “Uyghur genocide” tale ran by Brits and Yanks, nor the jihadization of some Uyghurs for the Middle-East American operations like Syria nor the fact that the same jihadi groups have wishes of subversive operations in Xinjyang.
Kazakhstan:. when Tokayev became president after Nazirbayev, there was a tentative “maïdan” that was stopped with help of Russian troops,, and there was a purge operated inside state security organs, the head and a network being arrested for having maintained a secret jihadist training center in the mountains South of Almaty. There are many Brits, Yanks, some Australian in Almaty, they meet at the local “irish” bar to have a stout. All cool easy going joking pals. Meet the new t-shirt bearded backpacker looking James Bonds. There are much much more Chineses in the whole district South of downton and the daily train and buses to China.
If it was a chessgame, it is about a consolidating strategy ie. “positional” play, and the other player (USA) getting into violent tactic moves at different nodes of the position.
One way to hurt USA is to kill Americans abroad. Then piracy and terrorist actions ran by Brits and USA could be answered with the same.