WEBVTT - Here’s Why China Is a Key Player in the Israel-Iran Conflict

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news. I'm Stephen Carroll, and

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<v Speaker 1>this is Here's Why, where we take one new story

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<v Speaker 1>and explain it in just a few minutes with our

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<v Speaker 1>experts Here at Bloomberg.

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<v Speaker 2>We've taken out top military commanders, senior nuclear scientists, the

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<v Speaker 2>Islamic regime's most significant enrichment facility, and a large portion

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<v Speaker 2>of its ballistic missile arsenal. More is on the way.

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<v Speaker 1>The escalation in the conflict between Iran and Israel has

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<v Speaker 1>sent shockwaves across the Middle East and through global markets.

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<v Speaker 1>While much of the focus has been on the United

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<v Speaker 1>States role, there's another economic powerhouse that's watching closely. As

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<v Speaker 1>Middle East energy expert Alan Wald explains.

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<v Speaker 3>China is a really big player. China is basically the

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<v Speaker 3>largest customer for these Persian golf producers that includes Iran

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<v Speaker 3>and Saudi Arabia and other And you don't want to

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<v Speaker 3>kick the nest when it comes to China. China is

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<v Speaker 3>not going to like it if their ships are disrupted,

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<v Speaker 3>if there are access to oil is disrupted.

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<v Speaker 1>So here's why China is a key player in the

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<v Speaker 1>Israel Iran conflict. Our Greater China Executive editor John Lewell

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<v Speaker 1>joins us now for more John, First of all, how

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<v Speaker 1>important is Iran to China.

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<v Speaker 4>China is the world's largest importer of oil and needs

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<v Speaker 4>that oil to power its economy. That economy has been weak.

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<v Speaker 4>It's been struggling with consumer prices, it's been struggling with

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<v Speaker 4>efficiency and productivity. Higher oil prices is not going to

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<v Speaker 4>help that. And volatility upheaval in the Middle East and

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<v Speaker 4>around the world is not going to help. It's not

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<v Speaker 4>going to mean people are going to buy more Chinese exports.

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<v Speaker 4>And so much of the oil that China needs comes

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<v Speaker 4>from the Middle East, And because of American sanctions, China

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<v Speaker 4>is substantially the biggest buyer of Iranian oil, and so

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<v Speaker 4>the sticks are high.

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<v Speaker 1>So a strong economic link then between Iran and China.

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<v Speaker 1>But what about Beijing's relationship with Israel? How close are

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<v Speaker 1>those countries.

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<v Speaker 4>The relationship with Israel is a difficult one at the moment,

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<v Speaker 4>and primarily that is because of how close a relationship

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<v Speaker 4>Israel has with the United States and the fact that

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<v Speaker 4>China and the United States are embroiled in this rivalry.

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<v Speaker 4>And so as part of that rivalry between the US

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<v Speaker 4>and China, China has wanted to present itself on the

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<v Speaker 4>global stage as being a champion of the global South,

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<v Speaker 4>and the Muslim world is a very important part of

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<v Speaker 4>that global South that China wants to get on its side.

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<v Speaker 4>And so whenever there's been a conflict Israel's conduct in Gaza,

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<v Speaker 4>in Lebanon, and now with Iran, China has on the

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<v Speaker 4>global stage stood with the Muslim countries as part of

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<v Speaker 4>this attempt to become this champion of the global South.

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<v Speaker 1>What is Beijing said about this escalation between Iran and

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<v Speaker 1>Israel so far?

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<v Speaker 4>So a day after the bombings in Iran started, a

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<v Speaker 4>Chinese Foreign Minister Wang You called both the foreign ministers

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<v Speaker 4>of Iran and the fore minister of Israel. He told

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<v Speaker 4>the Iranian foreign minister the China condemned the attacks, and

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<v Speaker 4>he told the Israeli foreign minister that China was very

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<v Speaker 4>opposed to the attacks. And so a few days after that,

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<v Speaker 4>President Sheijing Ping came out and said that China was

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<v Speaker 4>deeply worried about the situation in Iran. And in both instances,

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<v Speaker 4>President Chi and Foreign Minister Wang You have come out

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<v Speaker 4>to say that China wants to play a role in

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<v Speaker 4>diplomacy that they do not think diplomacy has been you know,

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<v Speaker 4>lost the way. They still think diplomacy is a way

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<v Speaker 4>that the nuclear issue can be resolved.

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<v Speaker 1>China has been a mediator in the Middle East before

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<v Speaker 1>brokering a deal between Saudi Arabia and Iran and in

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<v Speaker 1>twenty twenty three. Is the region a strategic priority for Chinese?

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<v Speaker 4>I wanna say it is a priority, although I think

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<v Speaker 4>in this instance it will be more difficult for China

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<v Speaker 4>to play the mediator than it was in twenty twenty

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<v Speaker 4>three with Iran and Saudi Arabia, because China has a

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<v Speaker 4>relatively good relationship with both Iran and Saudi Arabia, whereas

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<v Speaker 4>we are just discussing the relationship with Israel and by extension,

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<v Speaker 4>the United States has been much more difficult, and so

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<v Speaker 4>I think there would be much more suspicion on the

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<v Speaker 4>part of Israel and the United States on how fair

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<v Speaker 4>and unbiased the mediator China could be in the situation.

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<v Speaker 1>What should we have learned from how China has responded

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<v Speaker 1>to previous episodes of violence and then at least to

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<v Speaker 1>understand how their response might play out from here.

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<v Speaker 4>I think the response will be limited to rhetoric, and

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<v Speaker 4>I think you will hear a lot of rhetoric coming

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<v Speaker 4>out of Beijing condemning the Israeli attacks, also drawing a

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<v Speaker 4>line between Israel and the United States. But I think

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<v Speaker 4>it will stay at rhetoric because one China has actually

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<v Speaker 4>deeper economic ties with Saudi Arabia and the Gulf States.

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<v Speaker 4>China not only buys energy from those places, but it

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<v Speaker 4>also invests in those places. You have Chinese companies building

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<v Speaker 4>factories there, There's a Chinese self driving company, pony Ai,

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<v Speaker 4>who's putting driverless vehicles on the roads in those countries,

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<v Speaker 4>and so that economic relationship is much deeper than the

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<v Speaker 4>one that China has with Iran. And I think also

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<v Speaker 4>it's important to note that if this conflict results in

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<v Speaker 4>the United States being embroiled and yet another Middle East conflict,

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<v Speaker 4>Beijing's not going to be unhappy about that.

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<v Speaker 1>What could provoke a greater reaction from China in terms

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<v Speaker 1>of defending its links to Iran.

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<v Speaker 4>I think if there was some action directly against the regime,

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<v Speaker 4>that there was an effort to topple the regime, I

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<v Speaker 4>think that would be very sensitive to China, because there

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<v Speaker 4>is the suspicion in Beijing that ultimately that is what

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<v Speaker 4>the United States wants for China as well, regime change,

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<v Speaker 4>and so I think you would see an uptick in

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<v Speaker 4>the rhetoric. But again, I don't think it would go

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<v Speaker 4>beyond that. I don't think Beijing is ready to take

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<v Speaker 4>up arms for Iran.

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<v Speaker 1>How does what's happening in the Middle East play into

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<v Speaker 1>where China's relationship is with the United States at the moment?

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<v Speaker 1>Will the trade issues become embroiled and influence how China

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<v Speaker 1>is going to act from here?

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<v Speaker 4>I think China will use what's happening with Iran as

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<v Speaker 4>a propaganda tool. We've seen that with Gaza, We've seen

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<v Speaker 4>that with Lebanon. I think we will see it again.

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<v Speaker 4>We will see China try and paint Israel in the

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<v Speaker 4>United States as being co conspirators and conducting themselves poorly

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<v Speaker 4>on the global stage. I don't think China wants to

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<v Speaker 4>be embroiled any further than that. And I don't think

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<v Speaker 4>China is going to, let's say, offer rare earth magnets

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<v Speaker 4>of the United States, let's up on, you know, supporting Israel.

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<v Speaker 4>I don't think those cards are on the table.

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<v Speaker 1>John lou Are, Greater China Executive Editor, thank you very much.

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<v Speaker 1>For more explanations like this from our team of three

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<v Speaker 1>thousand journalists and analysts around the world, go to bloomberg

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<v Speaker 1>dot com slash explainers. I'm Stephen Carroll. This is here's why.

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<v Speaker 1>I'll be back next week with more. Thanks for listening.