S8 Ep546: ### HEADLINE: CHINA’S ENERGY DEPENDENCE AND THE REBUILDING OF IRAN SUMMARY:Max Meizlish discusses China's reliance on Iranian oil and proposes a U.S. "economic strike force" to stabilize Iran while excluding Chinese interests from reconstruction. GUEST: M

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I'm John Batchler.

I welcome my good colleague Max Meislich

of the Foundation for Defensive Democracies,

asking questions that are impossible to answer,

but there it is, China in the Iran War,

where in the Iran War, what advantage

or otherwise does China find?

People's Republic of China has an agenda

to take over the whole world, remember?

This is a hegemon that looks to be the global hegemon.

Is it learning from the war?

And especially, what is it learning about?

It's apparent dependence upon the Islamic Republic

of Iran for energy.

Max, a very good evening to you.

To your colleague, you Jack Burnham

and yourself have written a piece that is extremely helpful.

I want to imagine first, what is the dependence now

that the people's Republic of China has on Islamic Republic

of Iran?

I'm told, and this could be a random number,

that 25% of the oil coming out of the Gulf is headed to China.

What dependence do they have now?

And what did they anticipate in the event of warfare?

Good evening to you, Max.

Good evening, John.

It's true that China is heavily dependent

on access to energy coming out of the Gulf.

In particular, with respect to the flows from Iran,

China has been pretty much the sole buyer,

about 90% of Iran's exported oil does go to China,

largely the teapot refineries,

the so-called independent, small teapot refineries

that are privately held, and they do the bulk of this refining.

But beyond just the flow of Iran from Iran,

China is receiving significant amounts of energy from the Gulf.

And so it's heavily exposed in the current crisis,

which is why we see outreach from China to Iran

and to other Gulf partners trying to stabilize the situation

such that their access to energy is uninhibited.

I'm told anecdotally that there is reporting

that PLA officers are in Iran or have been in Iran

as technical advisors, anything to that, Max.

John, I'm not quite sure at this point.

I know there are some reports going around online.

I think some unconfirmed reports.

You know, the interesting thing that we do know

is that there's Chinese firms

that are providing commercially available satellite imagery

and putting it up online,

noting where the United States and Israel have assets

that are actually doing the bulk work

of the targeting of Iranian assets.

And so it's really an interesting observation

that Chinese firms might be leveraging Western satellite,

commercial satellite providers

and putting it out onto the internet.

Also leveraging Chinese satellite imagery

but putting this out so that the Iranians might be able

to actually have an advantage in understanding

where it is that U.S. and Israeli assets are

and when they might be striking.

Then setting that aside, because this is fog of war,

I just mentioned these erratic totes.

Nobody's shown anything that looks like proof.

I go to the day after.

That's the most compelling part of this story

that you and Jack are watching.

In the event that the Islamic Republic of Iran

surrenders, in the event that there needs to be attention,

there's no food security, there's no medical security,

there's no security whatsoever

in a country of 90 million people.

In that event, they need help for everything,

not just gunmen, but they need accountants,

they need programming, they need assistance

to guide their economy after decades of corruption.

How do you imagine that will work, Max?

Where's the story of rebuilding Iran right now?

Well, John, for a little while now,

my colleague at a FDD Center on Economic and Financial Power,

the Deputy Director, Josh Barabaman,

I have been writing on this concept

of an economic strike force

and how the United States needs to bolster its capacity

to actually support countries, maybe in the midst of

and then immediately after times of crisis.

So if the government of Iran at the regime falls,

if there's something that can come and stabilize

and maybe be more welcome to the United States

and pushing out Chinese interests,

we should be able to offer conditional access to goods,

to lines of credit, to some sort of measure

of financial stability and providing the resources

that Iran will actually need to rebuild

and create a prosperous economic environment for the people.

So this is something that we're thinking about

in the context of Iran, we're thinking about

in the context of Venezuela.

And John, I think it's important for everyone listening

to think about not just how vulnerable China is

to the Iranian energy disruptions,

but think about it in the context

of other sanctioned factors, right?

So we have Iran, we have Venezuela, we have Russia.

Combine, that's about a third of what China imports

on a yearly basis in terms of crude oil.

And so we see the Trump administration taking this action

against Venezuela.

We see what's happening now with Iran.

And then the question is if the president might actually

take even more action against Russia's shadow fleet

and the sanctioned oil coming out of Russia

in a way that taken together,

it would be removing all the legs of the storm

which China is actually benefiting from sanctioned oil.

We watch the tangle of trade talks in Europe

and puzzle about whether our allies understand

the adversary, China, as a predator state,

that also would be a great immediate concern in Iran.

Do we allow China in the door?

And how do we keep them out if they come with cash and gifts?

You know, this is one of the recommendations

that Jack and I have in our piece for the foundation

for defensive democracies.

We are outlining the fact that the United States

is going to need to put pressure on whatever government

comes out of this conflict in Iran

to prevent China from coming in

and benefiting from critical infrastructure reconstruction,

access to material and goods, energy flows from Iran.

We have to recognize that Iran has been the primary sanctions

of aid or in chief, the primary backer

of Iranian sanctions evasion for years.

It's provided the Iranian Revolutionary Guard Corps

with surveillance systems for domestic repression.

It's provided them with weapons technology

and training for the military.

We can't just allow China to benefit from all of this,

backing one of the chief adversaries

of the United States in Iran

and then come in after the crisis

and actually reap the financial rewards of whatever's to come.

I noted that part of your concern

because look at Afghanistan,

massive, an example of the US spending treasure

and blood for 20 years.

And then the operation is abandoned.

Exactly, and there's actually something smart

that we can model off of what's happening in Venezuela.

The United States is using its sanctions authorities

in a really interesting creative way

where the United States is saying that

Venezuela and oil can enter the market

but any participant isn't going to involve a Chinese entity

or a Chinese joint venture.

Now that doesn't mean that China can't buy Venezuela and oil

but what it does mean is that it's going to have to go through

companies that are registered under the laws of the United States

and they're going to have to pay the full fare

just as everyone else is.

So the age of China accessing discounted oil

is coming to an end.

At this point, do you hear these conversations in Washington?

Your recommendations are very common senseical.

Are they echoed?

I think there's a lot of people in Washington

who want to move forward with some sort of sensible policies.

But the question is really how Congress is going to take action.

I mean, we see that there's been a slow roll approach

to increasing the economic pressure on Russia.

So Congress is waiting for the administration to take charge here

and I think it'd be recruited for the Trump administration

to lead from the position of strength

that it currently finds itself in

and actually making a meaningful dent

in limiting China's ability to come in

and reap the rewards of all the instability

that it's actually created in the first place.

And will this create security enough

for private investment?

I think we're a far ways away.

I mean, we have to figure out what kind of government

is actually going to come in

and restore some sense of order,

some legitimate rule of law.

We have to ensure that assets won't be nationalized

by Western firms coming in.

We have to create a safe environment for companies

to come in and operate.

So let's just put a pause on unseeing,

whether there's going to be an appetite in the immediate future.

But I can tell you over the long term,

Iran has the fourth largest proven reserves of oil

in the world.

There's going to be an appetite for investment

over the long term.

Max Meisler, foundation for the defensive democracies,

I'm John Batchler.

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