With conflicts in the Middle East continuing to escalate, several countries are feeling the economic brunt. Economist have predicted that oil prices will fluctuate globally and affect some countries more than others. China’s economy, in particular, is among the countries facing possible upsets in their trade and oil/energy sectors. Some investors and speculators may want to consider the risks from all the emerging, geopolitical discord between the countries involved.
Saudi Arabia and Iran are the second and third biggest economies in the Middle East, only behind Turkey. With Saudi Arabia and Iran cutting off diplomatic ties with each other and vying for domination of their set of Islamic beliefs in the region, tensions rise. Other nations that began to follow suit include the United-Arab-Emirates, Qatar, Bahrain and Kuwait. These conflicts are very worrisome when also considering the ongoing conflicts between Yemen and Syria. Bringing about peace in Syria has become increasingly difficult because of the Saudi-Iranian conflict. We can witness this growing tragedy as massive amounts of refugees try to flee the ongoing violence.
China’s source of energy imports from this region, some estimates show, are as high as 51 percent. Over the past ten years China’s trade and oil supply with the Middle East had increased by nearly 600 percent. This gave China a huge economic upturn, especially when considering the oil interests that brought China and the Arab world economically closer. All this supply and demand for oil in China is compounded by the other countries that will be economically effected too — Europe, India and Japan. For investors, this means considering all the repercussions of the world trade-economy from the quagmire of these tragic conflicts.
Even while China may feel caught in the cross-hairs of Middle Eastern conflicts, economist say the global supply of oil will be affected. This is because, according to the U.S. Energy Information Administration, the Middle East controls nearly a quarter of the global oil supply. When we break that down, Saudi Arabia produces around 10 million barrels-per-day(bpd) of oil. Iran is responsible for about 3 million-bpd and countries that are slowly taking sides, including OPEC (Organization of Petroleum Exporting Countries), who produce another 12 million-bpd. Although the economic effects are unknown, trade and tourism in relation to the global economy may be negatively impacted as well.
The escalating conflicts in the Middle East has China worried about the impact on their energy and economic security. However, their worries are only exacerbated by the anxiety ridden policies toward their Muslim minorities. Particularly, among the Uighur population in Xinjiang, under Beijing’s rule. The Uighur population oppose the socio-political and cultural marginalization under Beijing and are currently being suppressed by new counter-terrorism policies that block any type of protest and rebellion among this population. With that in mind, China’s economy will not only be impacted by the rising conflicts in the Middle East, their growing anxiety about domestic security will be as well. This is because of the supposed spread of Islamic Fundamentalism, which have led China’s current counter-terrorism policies, that some experts have referred to as low-key-diplomacy.
With an understanding of how the rising conflicts in the Middle East effect China’s economy, investors and speculators should consider how the conflicts effect the global economy as well. Especially when, according to the U.S. Energy Information Administration, Saudi Arabia’s oil production is nearly one-third of OPEC’s supply and about 12 percent of the global demand. Investors should also consider the list of countries that are involved in emerging conflicts or are slowly being affected: Saudi Arabia, Iran, Yemen, Syria, Bahrain, Qatar, United Arab Emirates, Kuwait and Turkey. With all these countries involved in conflict, world powers, such as Russia and the United States have attempted to step in as well. Because monied interests all over the world will be impacted by the rising conflicts.
China’s growing anxieties about the impact on their steadily stagnant economy due to the Saudi-Iranian conflict only deepens with their domestic worries. The ongoing sectarian disputes in the quagmire of the Middle East, some feel will fuel the extremist ideologies on an international level. So China’s relations with the Arab economy places them in the cross-hairs of politics as well. China’s expanding monied interests in the Middle East coupled with their low-key policies against their Muslim minorities within the country should be enough to educate investors and speculators on all the risks involved.
With China being heavily dependent on Saudi Arabia and Iran for oil, they cannot afford an all out war in the region. One must consider Saudi Arabia’s 10 million-bpd of oil supply, which undermines Iran’s 3 million-bpd. Investors and speculators should take into account the countries in the Middle East that are in conflict as well as all the countries that have a stake in oil, trade and tourism in the region.