WEBVTT - Where the China-Iran Relationship Goes From Here

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news, and I want to

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<v Speaker 1>thank you for joining us at the conclusion of a

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<v Speaker 1>highly productive NATO summit in the Netherlands.

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<v Speaker 2>I want to thank them for.

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<v Speaker 1>The today's NATO summit in the Netherlands. President Trump fielded

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<v Speaker 1>questions from reporters about Israel and Iran and the next

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<v Speaker 1>steps in the conflict. Matthew, are you interested in restarting

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<v Speaker 1>negotiations with Iran? You just said you believe the conflict

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<v Speaker 1>between Israel and Iran is over. What makes you so

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<v Speaker 1>confident it is? Are you relying on Israeli intelligence for

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<v Speaker 1>your assessment of Negotiations with Iran are ongoing and talks

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<v Speaker 1>are expected to take place next week. But there's been

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<v Speaker 1>another thing on Trump's mind.

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<v Speaker 2>Yesterday you said China canal continue to purchase oil from Iran.

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<v Speaker 1>Iranian oil from the podium, Trump expanded on some thing

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<v Speaker 1>he'd posted on truth social a day earlier.

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<v Speaker 3>They're the oil business. I mean I could stop it

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<v Speaker 3>if I wanted. I could sell China the oil myself.

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<v Speaker 2>I don't want to do that.

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<v Speaker 3>They're going to need money to put that country back

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<v Speaker 3>into shape.

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<v Speaker 1>We want to see that China can continue buying oil

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<v Speaker 1>from Iran.

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<v Speaker 2>China is gonna want to buy oil. They can buy

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<v Speaker 2>it from US, they can buy it from.

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<v Speaker 1>Other people, but you're going to have to put that

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<v Speaker 1>country back into shape.

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<v Speaker 2>It needs, desperately needs money.

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<v Speaker 1>China is Iran's biggest trading partner and sources about fourteen

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<v Speaker 1>percent of its oil from the country. Between China's economic

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<v Speaker 1>relationship with Iran and its ongoing trade negotiations with the US,

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<v Speaker 1>the conflict between Israel and Iran, and especially US involvement,

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<v Speaker 1>has put China in a difficult position.

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<v Speaker 3>Beijing, meanwhile, has criticized a US strike on Iranian nuclear facilities,

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<v Speaker 3>saying again it's willing to join international efforts to restore

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<v Speaker 3>peace in the Middle East.

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<v Speaker 1>China, like many countries, also buys oil from Iran's neighbors

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<v Speaker 1>that passes through the Strait of Hormots, which Iran has

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<v Speaker 1>threatened to shut down. On Sunday, Secretary of State Marco

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<v Speaker 1>Rubio spoke with Fox News and called on China to

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<v Speaker 1>apply pressure to Iran when it comes to the Strait.

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<v Speaker 3>I encourage the Chinese government in Beijing to call them

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<v Speaker 3>about that, because they heavily depend on the Straits or

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<v Speaker 3>hormones for their oil. If they do that, it'll be

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<v Speaker 3>another terribleness. They gets economic suicide for them if they

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<v Speaker 3>do it.

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<v Speaker 1>My Big Take Asia co host Juan Ha spoke with

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<v Speaker 1>our colleague John Lou who oversees coverage of China from Beijing.

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<v Speaker 1>They talked about what the Israel Iran conflict has revealed

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<v Speaker 1>about China's influence in the Middle East and where China's

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<v Speaker 1>economic relationship with Iran could go from here.

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<v Speaker 3>I would expect China to take advantage of the situation

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<v Speaker 3>in that it will point to the United States and say, look,

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<v Speaker 3>the US is providing arms to Israel and those arms

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<v Speaker 3>are being used to create instability in the Middle East.

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<v Speaker 3>And I think the Chinese will primarily use the situation

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<v Speaker 3>as a way of painting the United States as the

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<v Speaker 3>unreliable global partner.

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<v Speaker 1>This is the Big Take Asia from Bloomberg News. I'm

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<v Speaker 1>Sarah Holder with One Ha in Hong Kong today on

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<v Speaker 1>the show What's at stake for China in Iran and

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<v Speaker 1>how the conflict could change China's game plan not just

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<v Speaker 1>in the Middle East but on the global stage.

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<v Speaker 2>John, thanks so much for joining us.

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<v Speaker 3>It's a pleasure to be here.

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<v Speaker 2>John, we're speaking on Tuesday afternoon. What do we know

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<v Speaker 2>about how the Chinese leadership views this conflict in the

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<v Speaker 2>Middle East and the US involvement in it.

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<v Speaker 3>First and foremost, I think the number one priority on

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<v Speaker 3>chijing pings to do list is the economy. And even

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<v Speaker 3>though China is not as much involved in this conflict

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<v Speaker 3>as many countries in the Middle East and closer to

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<v Speaker 3>the Middle East are, it is affected economically. It gets

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<v Speaker 3>a notable amount of energy from your It gets a

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<v Speaker 3>lot of energy from the Middle East. Chinese companies are

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<v Speaker 3>doing business in the Middle East, the electric car companies,

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<v Speaker 3>for example, and so if anything, Beijing would like to

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<v Speaker 3>see everybody get back to business.

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<v Speaker 2>China condemned the US attacks on Iran's nuclear facilities and

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<v Speaker 2>pushed a ceasefire proposal at the United Nations. How consistent

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<v Speaker 2>is that with China's foreign policy approach when it comes

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<v Speaker 2>to conflicts.

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<v Speaker 3>One of the things that China has tried to do

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<v Speaker 3>over the last couple of years, especially with President Trump's

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<v Speaker 3>return to office, is really portray itself as being this

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<v Speaker 3>champion of the developing world of the Global South, and

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<v Speaker 3>they have used conflicts like the one between Israel and

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<v Speaker 3>Hamas and Gaza and now with Iran to try to

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<v Speaker 3>portray itself as being the responsible player on the global

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<v Speaker 3>stage and the United States as being less responsible, as

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<v Speaker 3>being the one who is causing chaos, taking actions that

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<v Speaker 3>are disrupting trade, causing death and destruction in the Middle East.

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<v Speaker 2>China and Iran have a long history of cooperation, solidified

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<v Speaker 2>during the Iran Iraq War in the nineteen eighties, and

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<v Speaker 2>China is one of Iran's biggest supplier of arms. In

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<v Speaker 2>recent years, China's invested in Iranian infrastructure, telecommunications, and energy sectors,

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<v Speaker 2>and the two countries signed a twenty five year cooperation

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<v Speaker 2>agreement to strengthen their economic and political alliance. John how

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<v Speaker 2>important is China to Iran's economy and vice versa.

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<v Speaker 3>There is, I would say, an alignment of interest between

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<v Speaker 3>these two nations. They both are seeking alternative paths to

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<v Speaker 3>economic development that may have been shut off or stymied

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<v Speaker 3>by the United States or the West. In general, I

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<v Speaker 3>would say China is far more important to the Iranian

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<v Speaker 3>economy than Iran is to the Chinese economy. China is

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<v Speaker 3>the major buyer of Iranian oil that is a crucial

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<v Speaker 3>source of income for the regime in Tehran. The data

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<v Speaker 3>that we've seen from third party consultants, people who track

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<v Speaker 3>this data, China was buying about one point one million

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<v Speaker 3>barrels of oil from Iran a day in the month

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<v Speaker 3>of May this year. That's down about twenty percent, but

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<v Speaker 3>it accounts for about ten percent of how much oil

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<v Speaker 3>China is buying every month. China's buying about eleven twelve

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<v Speaker 3>million barrels of oil a day, and about one million

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<v Speaker 3>plus comes from Tehran, so it is important. Ten percent

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<v Speaker 3>is a lot, but it is not so high that

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<v Speaker 3>Beijing is dependent on that oil as being the main

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<v Speaker 3>driver of its economic growth.

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<v Speaker 2>Last November, Bloomberg investigation detailed how billions of dollars of

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<v Speaker 2>sanctioned Iranian oil is getting into China, even though on

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<v Speaker 2>paper the country hasn't imported a single drop since mid

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<v Speaker 2>twenty twenty two. How does that oil trade play into

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<v Speaker 2>the geopolitical tensions with the US.

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<v Speaker 3>It plays into the geopolitical tensions with the US because

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<v Speaker 3>the United States is trying to cut off income to

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<v Speaker 3>the Iranian regime, and so if there are buyers of

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<v Speaker 3>that oil even though the sanctions are in place, that

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<v Speaker 3>is undermining the purpose of those sanctions being put into place,

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<v Speaker 3>and so if Washington could put pressure on Beijing to

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<v Speaker 3>buy less Iranian oil, that would increase the leverage that

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<v Speaker 3>potentially Washington would have with Tehran at the bargaining table.

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<v Speaker 2>Now, about twenty percent of global oil goes through the

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<v Speaker 2>Strait of Hormuse every day. The strait is between Iran,

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<v Speaker 2>Oman and the United Arab Emirates. It's one of the

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<v Speaker 2>world's busiest oil shipping channels. The US asked China to

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<v Speaker 2>urge Iran to not close the straight after the US

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<v Speaker 2>bombed Iran's nuclear facilities over the weekend. What does that

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<v Speaker 2>say about China's influence over Iran and its role in

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<v Speaker 2>this conflict.

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<v Speaker 3>China's influence on Iran, I think is very well known

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<v Speaker 3>and pronounced. We have, of course, had China mediating return

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<v Speaker 3>to normal diplomatic ties between Iran and Saudi Arabia a

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<v Speaker 3>couple of years ago, and China could play that role

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<v Speaker 3>because of the relationship that it has with both Saudi

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<v Speaker 3>and Iran. And so I think there is influence. How

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<v Speaker 3>much of it that Beijing is willing to use or deploy,

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<v Speaker 3>I think that is hard to know. I think though

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<v Speaker 3>that Also, Iran knows China needs the oil to keep going,

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<v Speaker 3>and I don't think Iran necessarily needs Beijing to remind

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<v Speaker 3>it that the Strait of Hormus is very important to Beijing.

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<v Speaker 3>I think that's very clear to the Iranians. And you know,

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<v Speaker 3>Iran also wants to sell that oil. It needs the

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<v Speaker 3>income to come in, and so there's many many factors

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<v Speaker 3>that Tehran would have to consider before it shut that straight.

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<v Speaker 2>That seems unlikely at this point. But if China's access

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<v Speaker 2>to Iranian oil was cut off some other way, where

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<v Speaker 2>would China get its oil?

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<v Speaker 3>I mean, the other place is that China buys a

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<v Speaker 3>lot of its energy from flood Saudi Arabia, include Russia

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<v Speaker 3>and those places. I'm sure, given the current global environment

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<v Speaker 3>in terms of energy supplies, would be more than willing

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<v Speaker 3>to ramp up their provisions to the Chinese market. The

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<v Speaker 3>other thing is China is actually getting to a point

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<v Speaker 3>where it's oil demand may be peaking. The International Energy

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<v Speaker 3>Agency predicted that oil demand from China would peak in

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<v Speaker 3>twenty twenty seven, so that's very close. In the broader picture,

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<v Speaker 3>China is really investing in solar and wind and alternative

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<v Speaker 3>energies because it sees that as the future. But also

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<v Speaker 3>the economy is not doing that great, which means demand

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<v Speaker 3>is not growing that quickly.

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<v Speaker 2>Now I want to put it into stark terms, John,

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<v Speaker 2>without oil, what use then is Iran to China without oil?

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<v Speaker 3>I think there is a diplomatic advantage in having friends

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<v Speaker 3>in the Middle East for China. China wants to portray

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<v Speaker 3>itself as the champion of the developing world and being

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<v Speaker 3>able to point to Tehran. Being able to show that

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<v Speaker 3>it's helped a neighbor develop, being able to show it's

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<v Speaker 3>given support to this country in the Middle East does

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<v Speaker 3>help China and its relationship with other parts of the world,

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<v Speaker 3>and so there are additional benefits to China in addition

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<v Speaker 3>to oil.

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<v Speaker 2>With a weekend Iran, where does that leave China's influence

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<v Speaker 2>in the Middle East. That's after the break After the

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<v Speaker 2>US bombed Iran's nuclear facilities, you had Saudi Arabia, Qatar

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<v Speaker 2>and other Persian Gulf countries express dismay over the attack.

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<v Speaker 2>Given that China has been a supporter of Iran and

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<v Speaker 2>Iran is now on the back foot because of this conflict,

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<v Speaker 2>does this in any way dent China's influence.

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<v Speaker 3>I think it the put in some questions about some

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<v Speaker 3>of these organizations that China has been a part of.

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<v Speaker 3>So I'm thinking of the Shahai Cooperation Organization, which Iran

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<v Speaker 3>is a member of. It includes China, includes Russia, and

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<v Speaker 3>these are meant to be groupings that are supposed to

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<v Speaker 3>help country members with creating an alliance of like minded states.

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<v Speaker 3>I think the fact that these groupings have not been

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<v Speaker 3>able to step in and help Iran as it was

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<v Speaker 3>under attack from foreign forces will make them less compelling

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<v Speaker 3>of a grouping for other countries to join. Where do

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<v Speaker 3>we secure our security if we cannot secure it by

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<v Speaker 3>aligning ourselves with China or aligning ourselves with Russia. I

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<v Speaker 3>think that ultimately underlines the idea that it is really

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<v Speaker 3>the United States alone that is a global power with

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<v Speaker 3>reach anywhere around the world.

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<v Speaker 2>And of course, in this conflict, we've seen that the

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<v Speaker 2>US is willing to insert itself into Israel's war against Iran.

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<v Speaker 2>How might China be viewing this in relation to Taiwan

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<v Speaker 2>right in its own backyard, which the US, through a

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<v Speaker 2>congressional act, provides defensive arms.

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<v Speaker 3>To the focus of Chinese military planners has always been

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<v Speaker 3>what to do in case of a conflict over Taiwan.

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<v Speaker 3>I don't think the US bombing of the nuclear sites

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<v Speaker 3>in Iran changes Chinese calculation about how to respond to

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<v Speaker 3>some sort of provocation about Taiwan, or how to respond

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<v Speaker 3>if there was a conflict in the United States did

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<v Speaker 3>intervene in that conflict. The United States does sail warships

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<v Speaker 3>through the Taiwan Strait on a regular basis in the

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<v Speaker 3>South China Sea. There are American bases in Japan, in Korea,

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<v Speaker 3>in the Philippines, on Guam, and so I would expect

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<v Speaker 3>that Chinese military planners have considered all potential possibilities and

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<v Speaker 3>are planning for them. But I don't think this changes

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<v Speaker 3>the view that China has of Taiwan in any substantial way.

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<v Speaker 2>Iran will likely need help rebuilding. Will China step up

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<v Speaker 2>and consolidate its relationship with Iran and its presence in

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<v Speaker 2>the Middle East? Or do you think it's more likely

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<v Speaker 2>that it would step back and see what happens in

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<v Speaker 2>the region.

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<v Speaker 3>I think immediately China will wait and see how things

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<v Speaker 3>sort of unfold. I think in the Median term, there

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<v Speaker 3>would be definite interests not only by the Chinese government

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<v Speaker 3>but lots of Chinese companies and helping to invest and rebuild.

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<v Speaker 3>There will obviously be American sanctions. There are already on

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<v Speaker 3>what businesses can do in Iran. There may be more

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<v Speaker 3>to come, and so this will depend on how discussions

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<v Speaker 3>between the US and Tehran go. But if those sanctions

0:13:58.320 --> 0:14:00.000
<v Speaker 3>were to loosen it all, I think you would say,

0:14:00.000 --> 0:14:03.040
<v Speaker 3>see a lot of Chinese interests in helping to rebuild

0:14:03.280 --> 0:14:09.760
<v Speaker 3>Iranian infrastructure, probably not in nuclear nuclear especially as it

0:14:09.800 --> 0:14:14.160
<v Speaker 3>relates to defense or weapons related technologies, that that would

0:14:14.240 --> 0:14:19.680
<v Speaker 3>be I imagine something Beijing would be extremely careful about touching.

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<v Speaker 2>It was President Donald Trump who first announced the ceasefire

0:14:23.360 --> 0:14:26.760
<v Speaker 2>between Israel and Iran. China has been largely on the

0:14:26.800 --> 0:14:30.600
<v Speaker 2>sidelines of this conflict. What does the US involvement in

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<v Speaker 2>China's response tell us about their rivalry to influence and

0:14:34.720 --> 0:14:36.600
<v Speaker 2>shape world geopolitics?

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<v Speaker 3>You know, the narrative we've had for many years has

0:14:40.320 --> 0:14:43.480
<v Speaker 3>been about how quickly China is catching up to the

0:14:43.640 --> 0:14:47.560
<v Speaker 3>United States. And we hear that when it comes to GDP,

0:14:47.880 --> 0:14:50.480
<v Speaker 3>when it comes to trade, when it comes to manufacturing,

0:14:50.520 --> 0:14:54.320
<v Speaker 3>when it comes to AI and technology and chips. What

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<v Speaker 3>this episode I think shows is actually how big the

0:14:58.160 --> 0:15:02.000
<v Speaker 3>gap remains when it comes to to the thing that

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<v Speaker 3>matters the most when it comes to geopolitics on the

0:15:04.800 --> 0:15:08.720
<v Speaker 3>global stage, which is military capability. There is nowhere in

0:15:08.760 --> 0:15:12.120
<v Speaker 3>the world that the US cannot touch if it's so desired.

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<v Speaker 3>And the United States has also shown that when its

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<v Speaker 3>interests are infringed, when its interests are at staked, is

0:15:19.200 --> 0:15:22.480
<v Speaker 3>willing to take those actions. Those are things that cannot

0:15:22.520 --> 0:15:26.960
<v Speaker 3>be said about China, and I think it underlines how

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<v Speaker 3>big the power differential remains between these two countries.

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<v Speaker 2>This is The Big Take Asia from Bloomberg News. I'm wanha.

0:15:39.960 --> 0:15:42.560
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0:15:42.600 --> 0:15:45.800
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0:15:45.800 --> 0:15:49.160
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0:15:49.320 --> 0:15:51.760
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0:15:51.840 --> 0:15:55.120
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0:15:55.440 --> 0:15:56.960
<v Speaker 2>Thanks for listening, See you next time.