Trade war: China rallies energy giants

Bloomberg

China is mobilising its vast state-run energy industry to prepare for an economic tussle with the US that could escalate further and might last for years.
Top oil executives were busy this week touting the need for energy security, and even discussing the previously far-fetched notion that the nation could be cut off from overseas supplies. The public comments show China is beginning to prepare for the worst scenario in the trade war, said Laban Yu, an analyst at Jefferies Group LLC in Hong Kong.
In a meeting in Beijing, the chairman of top producer China National Petroleum Corp., Wang Yilin, urged employees to develop contingency plans for a “protracted and complex” trade dispute with Washington, according to a statement. At another event in Shanghai the same day, Sinopec’s former chairman, Fu Chengyu, said China should prepare for an extreme case whereby its overseas oil supplies are blocked entirely in the short term.
President Xi Jinping, meanwhile, hosted a meeting in Beijing approving Shanxi province to test new policies to drive its energy independence. On the national scale, Xi’s policy to cut China’s massive import bill is now taking on added significance due to the trade war and Washington’s sanctions on major suppliers such as Iran and Venezuela.
Energy security is moving to the top of China’s political agenda as the trade war intensifies. While tariffs resulted in cuts to US supplies to China, the world’s largest oil and gas importer may now be positioning itself for any escalation or widening of the dispute that, according to a recent prediction from a senior government researcher, could last until 2035. That follows Xi’s call for citizens to join a “ new Long March” amid the deepening conflict.
“China is now looking at its oil supply situation from the worst-case scenario, like wh-at the US has done to Iran,” Yu said. “Obviously, China believes now more than ever that similar US sanctions against a whole country could happen to China.”
China’s escalating rhetoric around rare earths, of which it’s the world’s dominant supplier, suggests the trade war may take a darker turn, with financial penalties on imports morphing into choking off supplies of critical raw materials. Beijing has a plan ready to restrict exports of the elements
with widespread applications across electronics, consumer goods and military.

‘URGENT REALITY’
The need for China to achieve energy self-sufficiency has become an “urgent reality,” according Sinopec’s Fu reported remarks. He called for shale gas development to be fiercely pursued, albeit without making an explicit link to the tensions with Washington.
China’s energy purchases from the US have faded. Imports of American liquefied natural gas slumped after Beijing tagged them with a 10 percent tariff that’s set to rise to 25 percent from June. Although excluded from duties, oil imports from the
US have become intermittent, as buyers exercise caution in doing business with a trade adversary.