The widening rift between the world’s two largest economies – the United States and China – has had analysts and market observers using the phrase ‘Cold War’ to describe how far the two global superpowers could go in their increasingly heated dispute. A new Iron Curtain could mean attempts to decouple the intertwined economic and trade relations between the biggest economies in the world, Reuters market analyst John Kemp argues.
Such decoupling, however, will take decades and may not be even possible, considering the intertwined global supply chains, including in the energy markets. Despite the isolationist policies of the Trump Administration and the trade war with China, the energy trade is globalized, and China plays a huge role in energy flows, including its purchases of U.S. crude oil and liquefied natural gas (LNG).
China is a superpower in the energy markets, and it is the world’s largest crude oil importer. However, Beijing’s growing dependence on imports of oil and natural gas has prompted its policymakers to emphasize strategies to boost energy security by incentivizing domestic oil and gas and coal production and seeking alliances abroad to ensure its energy needs.
Cold War 2.0 or not, China is set to continue influencing the global energy flows.
The Cold War narrative has recently intensified, especially after U.S. Secretary of State Mike Pompeo said in a speech last week, “If we bend the knee now, our children’s children may be at the mercy of the Chinese Communist Party, whose actions are the primary challenge today in the free world.”
“So we can’t face this challenge alone. The United Nations, NATO, the G7 countries, the G20, our combined economic, diplomatic, and military power is surely enough to meet this challenge if we direct it clearly and with great courage,” Secretary Pompeo said.