Ambrose Evans-Pritchard
Europe and China are natural allies in the world’s emerging bloc of electro-tech economies.
Both are large net importers of oil and fossil fuels. Both have a strong incentive to end this dangerous vulnerability as fast as possible.
The new line of strategic cleavage in global affairs is the clash of interests between those betting on total electrification, led by China, versus those betting on the old energy order, now led with ideological fervour by US President Donald Trump’s America.
Three quarters of humanity live in countries that run fossil deficits on their trade accounts and are bleeding their national wealth to the other quarter, which collects the rent.
This has been tolerated for lack of alternatives and because global shipping lanes have been secure. It will not be tolerated any longer.
The split has consequences that go far beyond primary energy. It determines how countries will shape their transport and industrial systems over the next 20 years.
Trump has sharpened the issue by seizing Venezuela’s oil and openly declaring his aim to gain a global stranglehold over fossil energy. This is coupled with an equally brazen pattern of weaponising commerce and supply chains to lash out at anybody who thwarts him.
Trump’s national security strategy exhorts Europe to reward Vladimir Putin, and it openly states the goal of “cultivating resistance to Europe’s current trajectory”.
Given that, it is no longer tolerable for Britain and Europe to maintain such heavy reliance on imports of oil and liquefied natural gas from the US or from any country under Trump’s spell or subject to his coercive reach.
The imperative is to electrify even faster as an urgent matter of national security, and that is one way to read the British government’s £15 billion ($29.5 billion) plan announced last week for solar panels, heat pumps and batteries.
Even before Trump lost all inhibitions, serious energy analysts were warning that the era of globally traded fossil fuels was under threat because trade was no longer politically safe.
“The energy transformation is on the cusp of re-accelerating. It will be driven by the quest for security, with nations creating a diversified energy mix of joules to insulate themselves from geopolitical, macro and financial risks,” said a report for the Carlyle Group entitled the New Joule Order.
Carlyle said the open trading system of the past 80 years had been a function of American and allied power, with “the US Navy as its muscle”.
Pax Americana allowed a constant stream of oil tankers to criss-cross the oceans unmolested, just as Britain’s Royal Navy had kept the sea lanes open for everybody as a collective good in the 19th century.
That marvellous American gift to the world expired last year. This year, Trump has actively joined the pirates.
China’s leaders have been fretting over the Malacca dilemma for over two decades, afraid that the US Seventh Fleet could blockade the shipping artery that lets through 70 per cent of the country’s oil imports and much of its LNG.
The Communist Party has a long memory. It has not forgotten that Washington imposed a crippling oil embargo on Maoist China after the revolution in 1949.
Energy think tank Ember says China accounted for two-thirds of the increase in global fossil demand from 2012 to 2022. Today, it is the world’s largest combined importer of oil and LNG by far. It will not be tomorrow.
The other reason why China will never buy the oil and gas that Trump wants to sell – and exploit as leverage – is that it is moving with breakneck speed to ditch the legacy energy system of the 20th century, and entrench its commercial dominance over the more advanced electro-technologies of the 21st century.
There is no need to rehearse the figures. Anybody who is paying attention knows by now that sales of combustion cars in the world’s largest car market have crashed to about 40 per cent on a rolling monthly basis. They will be close to irrelevant by the end of the decade. They know that trucks are following the same trajectory. Fossil use is already declining in Chinese manufacturing and buildings.
I notice repeated claims that the International Energy Agency has thrown in the towel on green-tech and now thinks that world demand for oil will continue growing briskly for a long time to come.
The IEA thinks no such thing. It included a new scenario in its World Energy Outlook to placate Project 2025 hardliners in Washington, knowing that its institutional survival was at stake.
The genuine view of IEA officials is that global oil demand will either plateau for a few years before starting to go into a gradual but irreversible decline, or that it will all happen faster and demand will collapse in the 2030s.
China is now streets ahead in electrification, reaching a third of its final energy consumption. It has installed 1700 gigawatts of solar and wind capacity, already blowing through its 2030 target. The scale is galactic.
“China is showing that a highly electrified energy system centred on wind and solar generation is entirely compatible with a modern, growing, highly industrialised economy,” says Ember. Vietnam is copying the model. So are others.
Joe Biden launched a belated bid to stay in the game with the Inflation Reduction Act. “That’s a battleship we’re stopping and turning back,” said Chris Wright, Trump’s energy secretary, speaking in Davos.
America is a complex country and Wright has not succeeded in stopping electro-tech progress, but the overall picture is that the US will be left behind with a pre-modern grid and low levels of electrification as China snatches the better energy prize.
Which leaves Europe awkwardly straddled between the two. It wants to cut fossil dependency and switch to safer home-grown energy – and it wants to do something about runaway climate change, lest we forget that unfashionable detail. It has some policies in place to achieve these objectives, up to a point.
Congress and the American people can still stop this, but first they must reel in the strategic pyromaniac that they have so recklessly enabled.
But it also has powerful vested interests in combustion cars, boilers, gas turbines, pipelines and the paraphernalia of the old molecule economy. A few months ago, it looked as if Europe might be drawn back into the US energy sphere. Trump’s serial provocations have ended that.
The question now is whether China and Europe can put aside their profound differences and form a tactical front against the global aggressor. There was talk of a Sino-European front after Trump’s “liberation day”. It came to nothing. Xi Jinping seized on the transatlantic rift to hit Europe while it was down.
Europe has another quarrel with China. It is suffering the full brunt of the China shock 2.0, the final dumping ground for China’s $US1.2 trillion ($1.7 trillion) trade surplus and its pathological excess capacity.
It takes a lot to throw these two foes together, but Trump may have pulled it off over the 10 days that shook the world, culminating in the Greenland disgrace.
China and Europe are reaching a modus vivendi of sorts over tariffs on electric vehicles. Chinese vice-premier He Lifeng was in Davos making sweet overtures to the Europeans and denouncing “the law of the jungle, where the strong bully the weak”.
Meanwhile, Trump’s hubristic cabinet was in nearby rooms acting like a pack of hyenas, dishing out insults, ridiculing all efforts to cut CO2 emissions and proclaiming the gospel of coal.
Trump’s advisers like to talk of a “reverse Nixon” where they bring Russia in from the cold and split the Sino-Russian axis.
They may soon find themselves the victim of a reverse triangulation with a twist as China outwits them, swooping into the Ukraine war to broker a peace deal and then detaching Europe from the defunct Atlantic alliance.
Congress and the American people can still stop this, but first they must reel in the strategic pyromaniac that they have so recklessly enabled.
Telegraph, London
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