How China is trying to control oil choke points in the Middle East

Oman occupies an extraordinarily important geographical position in the world and is therefore of equally important political importance for both global power blocs: the United States and its allies on the one hand, and the China-Russia axis and its allies on the other hand. The Sultanate has long coastlines along the Gulf of Oman and along the Arabian Sea, away from the politically sensitive Strait of Hormuz, through which at least a third of the world’s crude oil supplies pass. These coasts provide largely unrestricted access to markets in South Asia, West Asia and East Africa, as well as those of its Middle Eastern neighbours. For these reasons, Oman is a key land and sea logistics node in China’s “One Belt, One Road” multi-generational takeover project and, by default, in US efforts to counter the advances of Beijing in this regard. Oman has long sought to pit the superpowers against each other, but with an imminent visit to Muscat by Iranian President Ebrahim Raisi, sources close to the Oil Ministry in Tehran spoke to last week Oilprice.comChina’s final push for dominance may be coming to an end. Beyond China’s strategic interest in Oman, Iran has urgent business to do with the Sultanate itself, and that concerns, at least in theory, natural gas. National Iranian Gas Company (NIGC) chief executive Majid Chegeni said in March that Iran was willing and able to export natural gas to Oman, for which there is already infrastructure to do so, such as c This is the case with Pakistan and Afghanistan. Such an agreement, however, as with all similar gas agreements concluded by Iran for gas exports in the region and analyzed in depth in my new book on world oil marketsis linked to Tehran’s ambition to increase its influence over the countries wishing to sign the agreements by simultaneously linking them to a regional power grid controlled by Iran. This, in turn, is part of the ongoing attempt by the China-Russia axis – executed in the Middle East primarily by Iran – to fuel a genuine resurgence in the region of a new “pan-Arabist” movement, as recently highlighted by Oilprice.com.

The other side of this latest Iranian push, led by Raisi, is to finalize the long stalled idea of ​​finishing pipeline links between the two countries. This will allow a dramatic increase in gas exports from Iran to Oman but also, and much more important from Iran’s point of view, will also allow Tehran to use at least 25% of liquefied natural gas (LNG) capacities. ) of Oman to enable it to achieve its long-term goal of becoming a world leader LNG exporter. This pipeline plan was part of a broader cooperation agreement between Oman and Iran reached in 2013, expanded in 2014 and fully ratified in August 2015, centered on Oman importing at least 10 billion cubic meters. of natural gas per year (bcm/y) from Iran for 25 years from 2017 (equivalent to just under 1 billion cubic feet per day and worth about US$60 billion per year) era). The target for this was later changed to 43 bcm/year to be imported, albeit for a shorter period of 15 years, then eventually to at least 28 bcm/year for a minimum period of 15 years.

According to a statement at the time of the signing of the 2014 memorandum of understanding on the agreement by the managing director of the National Iranian Gas Export Company (NIGEC), Mehran Amir-Moeini, the Iranian company was already working on the various contracting mechanisms for key phases of the project, including gas reception facilities in Oman. Specifically, the onshore section of the project would include approximately 200 kilometers of 56-inch pipeline (to be built in Iran), to run from Rudan to Mount Mobarak in the southern province of Hormozgan. The marine section would include a 192 kilometer stretch of 36-inch pipeline along the bed of the Arabian Sea at depths of up to 1,340 meters from Iran to the port of Sohar in Oman. Iran is ready not only to undertake new phases of North Pars development but also the development for the LNG market of a number of other major gas fields, including more immediately Golshan, Ferdowsi, Farzad A and Farzad B, and Kish. It should not be forgotten that the main field from which Qatar draws gas to maintain its status as the world’s largest exporter of LNG is exactly the same 9,700 square kilometer reservoir from which Iran draws a large part of its own gas: the 6 Qatar’s 000 square kilometer side of the field is the North Dome, while the 3,700 square kilometer Iranian side is South Pars (North Pars was treated as an additional site).

The last, tangential part of this Iranian push is not directly linked to Iran but rather to China. Specifically, it stems from Beijing’s strategic ambition to control all the major choke points of crude oil transport routes from the Middle East to Europe and the West that avoid the more expensive and difficult route on the nautical plan of the Cape of Good Hope around South Africa. The Strait of Hormuz, which allows oil to be shipped from any Middle Eastern country that wishes to use it, is already effectively controlled by China through its relationship with Iran, cemented in the 25-year agreement reached in 2019. The Bab al-Mandab Strait, through which crude oil is routed to the Suez Canal before heading to the Mediterranean and then west, lies between Yemen (which is disrupted by the Iran-backed Houthis , as China wants) and Djibouti (over which China has established a stranglehold, as highlighted by Oilprice.com).

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There are other key areas of crude oil infrastructure in and around the Middle East and China is already trying to control them if it has not already done so: notably Iran Route Guriyeh-Jasksome UAE Coastal Facilities (the UAE seeks to present its relationship with China and Russia as part of a “balanced” foreign policy approach, but that is not how China, Russia or the United States see it ), and Saudi Arabia (also anxious to present the same “balanced” approach such as the UAE). It should be noted in this context that Saudi Crown Prince Mohammed bin Salman and Abu Dhabi Crown Prince Mohammed bin Zayed Al Nahyan recently refused to take an urgent phone call by US President Joe Biden on high oil prices and economic damage to developed economies. This brief analysis does not cover all the other incursions made into the Middle East by the China-Russia axis at the expense of the United States, but they are covered in many of my Items for Oilprice.com and even deeper into my new book on world oil markets.

Iranian President Raisi’s planned visit to Oman follows recent talks between the Omani Assistant to the Chief of Staff for Operations and Planning, Brigadier Abdulaziz Abdullah al-Manthri, and the Chief of Staff of the Iranian armed forces, Major General Mohammad Bagheri. ” The two countries [Iran and Oman] have conducted several joint naval exercises in recent years, but these [recent] the talks aimed to broaden this cooperation both in terms of the armed forces involved beyond just the navy and the scope of their joint activities beyond combating smuggling and countering terrorist threats,” an Iranian source who works closely with the Ministry of Petroleum told Oilprice.com. .

Long before that, China used financial distress in Oman, exacerbated by the 2014-2016 Saudi-led oil price war, to expand its presence in Oman. Already accounting for around 90% of Oman’s oil exports and the vast majority of its petrochemicals exports, China was quick to immediately pledge an additional $10 billion to invest in the ancillary oil refinery at the flagship Oman project. Duqm refinery in Oman. Although other investments from China have theoretically been directed towards the completion of the Duqm refinery, Chinese money has also been funneled into building and constructing an 11.72 square kilometer industrial park in Duqm in three areas – heavy industry, light industry and mixed use. This has allowed China to secure deeply strategic land areas in the Sultanate.

By Simon Watkins for Oilprice.com

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