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Within a span of just two months, US President Donald Trump has launched military aggression against two close allies of China. This has put the route for fuel oil supply to China under complete threat.
In January, the US arrested Venezuelan President Nicolas Maduro. On Saturday (February 28), Iran’s Supreme Leader Ayatollah Sayyed Ali Khamenei was killed in an airstrike. A significant reason behind Trump’s attacks against China’s two allies in South America and the Middle East is fuel oil. Both countries export the majority of their total fuel oil to China. Last year, half of Venezuela’s exports and almost all of Iran’s exports went to China, according to data analytics firm Kpler. The combined exports from these two countries account for 15 percent of China’s total energy imports.
Rob Thummel, a portfolio manager at Tortoise Capital, believes that China is the potential primary casualty in the conflict between Iran, Israel, and America. This is because the country produces less fuel oil than it demands.
He stated, ‘While high prices can impact economic growth, actual supply is even more crucial, as China relies on imported fuel oil to keep its economy running.’
Chinese Foreign Minister Wang Yi has described the aggression by Israel and America against Iran as ‘unacceptable.’ He also condemned the assassination of Ayatollah Khamenei and Washington’s threats to change the ruling powers in Iran. However, the one aspect he overlooked amidst all this was the potential economic impact.
Should fuel supply be disrupted, the economies of China and other Asian countries would face significant challenges. Tehran has already announced the closure of the strategically important Strait of Hormuz. The Iranian semi-official news agency Mehr News Agency reported that an oil tanker was attacked while traversing this route in violation of sanctions. Consequently, oil prices have already surged worldwide.