Clients of China’s vast Belt and Road Initiative (BRI) are asking Beijing for help with spiking energy costs due to the Iran conflict, but so far China has reportedly offered little assistance, instead shutting down fuel exports to conserve its own energy stockpiles and protect its own economy.
Reuters on Monday noted the “cold shoulder” from Beijing to its BRI clients is politically problematic, because China made grandiose promises of energy and economic security to the nations that were drawn into its orbit.
Some of China’s promises took the form of binding contracts, not just breezy assurances, but BRI client states like Bangladesh and Thailand are finding China reluctant to deliver promised shipments of fuel and fertilizer during the Iran crisis.
China banned exports of refined fuel in mid-March to increase the size of its own gasoline hoard. On Tuesday, despite mounting pressure from its anguished BRI clients, China announced it would extend the export ban into April, with some modest exceptions. Industry insiders said China could ship between 150,000 and 300,000 metric tons of fuel in April — a fraction of what it was originally projected to deliver.
Chinese officials have refused to comment on the ban, although they vaguely promised to make some fuel available to their regular Southeast Asian customers in the coming weeks.
Ship tracking websites noted on Monday that two Chinese tankers arrived in the Philippines over the weekend, while a third docked in Vietnam. It was not clear if these cargoes were sold before China’s ban on fuel exports went into effect. Cargoes that cleared Chinese customs before March 12 were supposed to be exempt from the ban.
Countries like Malaysia and the Philippines are also concerned about slowdowns of Chinese fertilizer shipments, as China is among the world’s largest producers of fertilizers.
The Chinese were already tinkering with their export levels to keep prices low for their own farmers before the Iran crisis shut down the Strait of Hormuz, through which about a third of China’s seaborne fertilizer shipments flow. If current trends hold, China’s prodigious exports of fertilizer could be reduced by almost half for March and April.
“This pattern is consistent: China restricts supplies rather than coming to the rescue during global tightness. The export restrictions exist because of their tight domestic balance — they’re prioritizing food security and insulating their domestic market from price shocks,” BMI senior commodities analyst Matthew Biggin complained in March.
Some of the growing unhappiness from BRI clients is due to China’s gigantic fuel stockpile, a massive reserve of roughly a billion barrels which Beijing spent years accumulating — and which Chinese officials are very reluctant to tap into, no matter how dry the tanks of their Belt and Road partners might become.
Since China is still receiving some oil shipments from Iran, it has been able to use its massive fuel reserve to keep retail gas prices fairly stable, thus minimizing the negative economic impact of the Iran conflict.
Other Southeast Asian countries have been obliged to implement fuel conservation measures that reduce productivity, and countries like Sri Lanka and the Philippines have experienced some labor unrest as transport unions go on strike to pressure their governments into subsidizing their high fuel costs.
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