x Abu Dhabi, UAEThursday 27 July 2017

Energy concern shows China's growing role

Wen's visit to the Middle East this week, at a time when tensions are high with Tehran, illustrates Beijing's growing role and responsibility.

Wen Jiabao, the Chinese prime minister, came to this week's World Future Energy Summit to speak about renewable energy. But oil tankers, more than solar panels, were the most pressing issue during his visit to the Gulf.

Beyond energy security, in turn, Mr Wen's Gulf visit offered an intriguing glimpse of a broad realignment that may link this region more closely with the big economies of Asia.

China, the principal buyer of Iranian crude, is naturally concerned about US and EU sanctions against Iran's oil trade and economy, and about Iran's warnings about shutting the Strait of Hormuz. More generally, the Chinese know that Iran, with which they have had relatively good relations, is in a shaky strategic position.

During his six days in the Gulf, Mr Wen met leaders in Saudi Arabia, the UAE and Qatar. During the visit, Beijing signed a deal to build a refinery in the Saudi Red Sea port of Yanbu. Last month, China beat out multinational oil firms to win an oil and gas concession in Afghanistan. It has also beefed up energy ties with other Central Asian countries. For China, security of supply is not just a buzz word; it is a vital policy Beijing was pursuing vigorously well before Iranian oil began to lose favour.

In this, China is not alone. Japan has agreed to reduce oil purchases from Iran; South Korea may follow suit. Other sources will have to be found, perhaps from the Gulf despite Tehran's warnings. In fact, stable oil supplies at stable prices are a prime concern everywhere.

Mr Wen went so far as to suggest "a global governance mechanism for energy, under the G20 framework, to stabilise oil and natural gas markets". Producing countries will have little interest in surrendering influence over oil prices, but buyers are not alone in wanting a calm, predictable market built on solid relationships.

Nor is this yearning limited to oil. China's GDP growth, although slowing, stands at 8.9 per cent year-over-year, while western economies stagnate. Many countries are taking note of the dawn of prosperity in the east. Trade, financial markets and even tourism are all ready to grow between East Asian countries and the Gulf.

The immediate problem, however, is the Iran situation, and here China could play a useful role. For years Beijing has supported Tehran diplomatically; it can expect a respectful hearing. Beijing consistently opposes sanctions anywhere as meddling in other countries' internal affairs, but its craving for oil could induce a quiet question put to Tehran: is nuclear status really worth all this disruption of Iran's economy, and perhaps that of the whole world?