Paul Brandus Archives | Email alerts

June 24, 2019, 11:08 a.m. EDT

Another way China is ripping us off

U.S. does the heavy lifting in the Persian Gulf—while China benefits

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Crude Oil WTI (NYM $/bbl) Front Month (CL.1)

or Cancel Already have a watchlist? Log In

By Paul Brandus, MarketWatch


Getty Images
Iranian troops take part in the "National Persian Gulf day" in the Strait of Hormuz, on April 30, 2019. - The date coincides with the anniversary of a successful military campaign by Shah Abbas the Great of Persia in the 17th century, which drove the Portuguese navy out of the Hormuz Island, after which is named the waterway which separates the Gulf from the Sea of Oman.

In the old days, it would have been absolutely essential for the United States to ensure that the Strait of Hormuz—through which a third of the world’s crude oil passes daily—remained open. It is less essential now, thanks to the oil shale revolution, which has once again made America an oil giant. We now produce more oil than Saudi Arabia and more than the Russians.

Meantime, China has become not only the biggest consumer of energy in the world, it has become, since 2014, the biggest importer of oil in the world . So why isn’t China—which has an increasingly powerful blue water navy and can project its might with growing ease—doing more to protect the flow of oil? Its oil?

So why is the United States doing the heavy lifting in the Persian Gulf? If war breaks out with Iran, it’ll be the U.S. Navy, American men and women in uniform, and the American taxpayer that will bear the burden. Not China—which needs Mideast oil more than we do.

Related: Strait of Hormuz: Oil ‘choke point’ in focus as U.S.-Iran tensions rise following attacks on tankers

President Donald Trump on Monday made a similar point, chiding China (and Japan) for not contributing.

Read : President calls on China to patrol Strait of Hormuz, to sign executive order on health pricing

Professor James Holmes of the U.S. Naval War College says the Chinese are getting a free ride.

“The United States has always thought of itself as the guardian of maritime security. So if China sees the U.S. taking care of security of Gulf oil supplies, then it will be glad to let us do so,” he says.

Holmes—who as a naval officer fought in the first Persian Gulf War in 1991—adds that not only does China get that free ride from us in the Gulf, it frees up resources for it to focus on other priorities in the Western Pacific and South China seas—interests that directly challenge the United States.

This two-for-one benefit for Beijing puts the United States in an odd position. We can’t afford to keep being the world’s policeman—so says President Trump. We’ve been tossing money away in the Middle East for decades he says, with little to show for it. Others, he keeps saying, should do more. Those comments are usually directed at our NATO allies. But China—with its economy thirsty for oil—shouldn’t it be doing more too? It can clearly afford to do so.

Also read: Iran says it shot down U.S. drone amid rising tensions

On the other hand, the United States is now transitioning to what could be a Cold War-style relationship with China. We’re talking about a country that—unlike the old Soviet Union—is four times our size in terms of population, growing about twice as fast (even after slowing down in recent years), and hellbent on overtaking us in the frantic race to dominate the technologies of this still young century: artificial intelligence, 5G, robotics, aerospace, biopharma and more. More American policymakers are coming around to the view that China is becoming a strategic rival—the only true threat we have, and therefore we must make a greater effort to limit its rise. So shouldn’t we be trying to contain it as best we can?

That’s the rub. China can do more. But do we really want it to? If the answer’s no, then we’re stuck with the tab. And so here we are, protecting their lifeblood—oil /zigman2/quotes/211629951/delayed CL.1 +1.20%  —so they can get stronger at our expense.

Holmes, who heads the Naval War College’s prestigious Wylie Chair of Maritime Strategy, says U.S. policymakers are undergoing—pardon the pun—a sea change with regard to how China is seen in the U.S. national security establishment.

“For a long time, it wasn’t obvious that China’s rise was going to be a threat,” he says. “We thought China would be a pushover for way too long. Even as late as the Bush administration, we were hoping that China could be brought in as a responsible maritime stakeholder and help maintain the basic world order as we presided over it.” It has only been fairly recently, he adds, that Americans figured out that “China does not see things that way and I think we’re still adjusting.”

Meantime, for all the talk about how American power is on the decline in the world, consider this: We are now such a force in the oil markets, that recent attacks on tankers on the Gulf haven’t impacted prices a bit. Brent crude, for example, is actually lower than it was last month. Walter Russell Mead, writing in the Wall Street Journal, notes that, “ven five years ago, the U.S. could not force Iran out of world oil markets without causing a devastating spike in oil and gas prices that would destabilize the world economy.”

That’s not the case today. So should we be sticking our necks out in the Gulf for the benefit of the Chinese? I say no.

/zigman2/quotes/211629951/delayed
US : U.S.: Nymex
$ 54.00
+0.64 +1.20%
Volume: 403,925
Oct. 17, 2019 4:47p
loading...

Paul Brandus is the White House bureau chief for West Wing Reports. You can follow him on Twitter WestWingReport.

This Story has 0 Comments
Be the first to comment
More News In
Economy & Politics

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.