Did Trump Trade Taiwan To China To End The Iran And Russia Wars?

As U.S. President Donald Trump landed in Beijing last Wednesday for a two-day summit with his Chinese counterpart Xi Jinping, his aides would have been acutely aware that he had faced extensive criticism in the past for his cosy dealings with the Chinese leader before, especially during his first presidential term. The fact that the summit had been postponed from late March, following the escalation of the war in Iran, will have naturally raised at least one potential topic of conversation, if not two. China remains the key financier -- through oil and gas imports, and other channels -- of both Iran’s continued war against the U.S. and of Russia’s ongoing war in Ukraine. Both conflicts have served to pressure global oil and gas prices higher in recent years, which begs the question: did Trump play nice again this time, or put the squeeze on Xi Jinping, and if he did, what did Xi ask for in return? Most in focus right now for Trump remains the impasse over the ongoing effective closure of the Strait of Hormuz, through which up to a third of the world’s oil has historically flowed and up to a fifth of its liquefied natural gas (LNG). In recent weeks, Washington has shifted from the ‘Epic Fury’ of kinetic war to the ‘Economic Fury’ of an attritional financial war based on sanctions. The problem here is that China keeps buying huge quantities of Iranian oil, as it has done for years, despite international sanctions, providing the ultimate economic lifeline for the longstanding Islamic regime in Tehran. Since the outbreak of the U.S./Israel-Iran War on 28 February, China has become Iran’s ‘buyer of last resort’, now purchasing up to 95% of all its oil exports, with oil currently accounting for over 50% of the country’s entire government budget. In February alone, Iran exported 60.7 million barrels of oil, netting Tehran an estimated US$4.27 billion, with China accounting for the vast majority of this financial injection. Most of this, in turn, is imported into supposedly ‘independent’ Chinese refineries (known as ‘teapots’), although in reality, all domestic businesses in China are directly or indirectly controlled by the State. Consequently, it is perfectly reasonable to posit -- as Washington does -- that one word from Xi to Iran about China ending all these imports unless the Strait of Hormuz is opened up immediately, would lift the blockade and end the war almost immediately. Related: Xi-Trump Summit Disappoints as Oil Bulls Regain Momentum The same argument applies to Russia’s President Vladimir Putin’s 10-day ‘Special Military Operation’ in Ukraine (now into its 1,543rd+ day). Russia relies on oil and gas for roughly one-third of its total budget revenues to directly fund its war chest, with China once again being the mainstay of this demand, since the European Union and Western allies slapped embargoes on Russian energy, as analysed in full in my latest book on the new global oil market order. China is now Russia’s top crude oil buyer, purchasing over 100 million tonnes of Russian crude annually, which accounts for roughly 20% of all Beijing’s energy imports. Additionally, as it stands, China imports more than 52 billion cubic metres (bcm) of natural gas from Russia annually, making Moscow its leading supplier of combined pipeline and LNG. Most of this flows directly overland via the Power of Siberia 1 pipeline. And following recent meetings between Xi and Putin, the current pipeline gas baseline of 38bcm is to be boosted to 44 bcm a year. Moreover, because Western sanctions cut Russia off from the SWIFT banking system, China’s energy purchases have catalysed the build-out of a parallel financial architecture between the two countries, and similar workarounds to U.S. dollar-dependency are in place between China and Iran too. That said, Washington cannot ultimately force Beijing into using its huge leverage over Iran and Russia to end the respective wars in which they are involved. The effects of just the imposition of bigger tariffs last year by the U.S. on China prompted a significant retaliatory response in the form both of increased reciprocal tariffs on the U.S. by China and an embargo on rare-earth minerals, which are vital components in several key areas of American manufacturing. Moreover, global stock markets slumped as related supply chain issues came firmly into focus. Instead, the U.S. continues to employ a gradual strategy of strangling Chinese expansion wherever and however it can, while China continues to drive economic growth as best it can, while undermining the global power of the U.S. where possible, especially through challenging U.S. dollar dominance in the global financial system. This has resulted broadly in a relatively even playing field for negotiations between the two countries, dominated by a quid pro quo approach. And in China’s case, the thing it wants in exchange for any pressure brought by it on Iran and Russia remains Taiwan. China’s stealth approach to the accretion of power and influence in target countries – founded on the mixture of economic and political elements inherent in the ‘Belt and Road Initiative’– is also the one Xi favours for the country’s eventual ‘repatriation’ of Taiwan, as also detailed in full in my latest book. The carefully drawn-up boundaries between the U.S. and China on what either could do relating to Taiwan are based on the highly precise terms of the ‘One China’ position. This is that: the U.S. ‘recognises’ the People’s Republic of China (based in Beijing) as the sole legal government of China, but only ‘acknowledges’ the Chinese position that Taiwan is part of China. That said, last February, the U.S. dropped the phrase “we do not support Taiwan independence” from a fact sheet on Taiwan-U.S. ties. After this, Beijing responded: “This sends a wrong and serious signal to separatist forces advocating for Taiwan independence and is another example of the U.S. stubbornly persisting with its wrong policy of using Taiwan to contain China.” Beijing added: “We urge the US to immediately correct its mistakes [and] earnestly adhere to the One China principle.” The White House did not mention Taiwan in its official description of the meeting between Trump and Xi, while the U.S. President himself appears to be using a form of the constructive ambiguity in his dealings with Xi over the matter, as promulgated by former National Security Advisor, Henry Kissinger, in the 1970s, as also fully explored in my latest book. Indeed, it was Kissinger who drafted a sentence in the Shanghai Communiqué after Richard Nixon’s historic 1972 visit to China that still forms the basis of the current understanding between Washington and Beijing: “The United States acknowledges that all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is a part of China. The United States Government does not challenge that position.” After the most recent meeting with Xi, Trump emphasised a desire to keep the current framework intact, noting: “If you kept it the way it is, I think China’s going to be OK with that.” He also said: “[Xi] considers it to be a part of China, and that’s up to him, what he’s going to be doing.” On the other hand, this did not prevent the U.S. from striking an US$11 billion arms deal with Taiwan in December. Against this backdrop, China is putting itself in an ideal position to finally exert its influence over Iran and Russia -- in exchange for a clearer path to ‘repatriate’ Taiwan -- if Trump ultimately decides that he needs a quicker exit strategy from the Iran War. Beijing has joined Pakistan as a mediator in the conflict, with Chinese officials having been instrumental in drawing up a five-point plan in March aimed at bringing about a ceasefire and reopening the Strait of Hormuz. “Much of this was to show good faith to the Americans, but it also underlined to them that Beijing is now officially engaged in the process here if they are minded to, and that means they expect something more accommodating for China from Washington on the Taiwan issue,” a senior source who works closely with the European Union’s security complex exclusively told OilPrice.com last week. “The recent visit of [Iranian Foreign Minister Abbas] Araghchi to Beijing looked like a demonstration of this China mediation option to the U.S., adding to the sort of positive comments that were made on opening up the Strait [of Hormuz] by Chinese sources last week,” he added. “On the other hand, if Trump doesn’t take that route, then Iran is likely to keep digging in, and the U.S. may have to resume its costly military operations in earnest in the next few days, with all the prospects for further oil and gasoline price rises that this entails,” he concluded. By Simon Watkins for Oilprice.com More Top Reads From Oilprice.com