China’s Axis of Oil

China obtains 50% of its imported oil and gas from the Middle East. Iran and Saudi Arabia alone account for over 30% of the oil portion of this. In return, the Gulf States have been sinking more and more of their petrodollars into China and throughout Asia.

Historically, this money would have been destined for the US and Europe, almost without question, but times are changing.
While there is clearly a growing rivalry for energy resources and influence in the Middle East between Beijing and Washington, the two countries have mutual interests that run far deeper.

Beijing’s economy is still largely export dependent and it needs access to US markets as well as to continued technology transfers. Washington, on the other hand, must protect huge sunken investments in China by US corporate interests as well as ensure that Beijing continues to fund its current account deficit through the purchase of government issued debt instruments.

Despite its ascendant role in the world, it is clearly in China’s interest to keep a low profile in the Middle East. Beijing’s priority remains internal development as China strives to develop into a “complete” power over the next several decades.

Beyond that, the landscape is less clear.

BusinessWeek