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JUNE 2021

China Will Soon Be Able To Close Off The Straits Of Hormuz And The Red Sea

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Originally appeared at ZeroHedge

By Michael Every of Rabobank

The world is rightly shocked today by the terrible explosion that devastated Beirut, and our thoughts go out to the people of Lebanon. The cause is still unknown, but visual evidence and official government statements suggest it was a tragic accident due to storing fireworks next to up to 2,750 tons(!) of ammonium nitrate. Despite denials from daggers-drawn Israel and Hezbollah, even a region rife in conspiracy theories had dismissed thoughts of this being either (Lebanese) politics or regional geopolitics (indeed, Israel has offered medical assistance given Beirut’s hospitals are overflowing)…until US President Trump blurted out his generals had told him it looked like a bomb and “attack” of some kind. Speculation or confidential information? Either way, it’s explosive.

As is the fact that not too far away, the United Arab Emirates has opened its first nuclear reactor, a step to being able to develop a nuclear weapon if it so chooses – though it has sworn not to. Not so sworn, perhaps, is Saudi Arabia. The Wall Street Journal reports China has helped Riyadh construct a facility for extracting uranium ‘yellowcake’ from uranium ore, a crucial step to developing nukes. It’s ironic given China has signed a 25-year co-operation agreement with the Saudis’ bitter foe Iran, including military cooperation, and Tehran is itself not far from a nuclear breakout capability. It’s also tragic if this leads to greater regional instability – which has serious implications for energy prices we saw just a flicker of yesterday. It’s also a further indication that China and Russia are stepping into the energy-rich Middle East as the US has tried to step back.

Specifically, if China and Iran develop their deal on the ground and China expands the power of its Djibouti naval base with further ship-building, one could potentially see a not-too-distant future where oil flows to China via the Belt and Road and, at the same time, China could be able to close off the Straits of Hormuz and the Red Sea if it wanted, making it primus inter pares. That’s the stick that it would not want to use; the carrot would be helping all sides on trade, infrastructure, weapons, and nuclear energy (For a more detailed run-down, see here.) Even the carrot is a highly explosive prospect given what it implies for energy pricing and so the future of the US dollar. Indeed, it is something the US won’t just sit back and let happen under President Trump or any other president.

China Will Soon Be Able To Close Off The Straits Of Hormuz And The Red Sea

Meanwhile, Turkey has its own controversial Mediterranean energy claims it is pressing ahead with, to which France has reacted with talk of sending naval vessels to Cyprus. Markets are already on edge here, with USD/TRY testing towards the psychological 7 level and overnight interest rates hitting as high as 1,024%(!) yesterday: a volatile fusion of markets and geopolitics is at play again, it seems, which does not likely to get better anytime soon.

Likewise as talks to see Indian and Chinese forces –now including tens of thousands of men, heavy tanks, and planes– pull back from their disputed border have stalled. India is insisting China retreats from all the territory it has taken; China is literally digging in and insisting India drops its economic boycott of Chinese goods and services. Indian analysis underlines New Delhi faces a stark choice between accepting the loss of territory so far (and China the loss of influence and Indian market share) or pushing ahead militarily to reclaim the land – which would obviously be explosive. Markets are assuming it must be the former, “obviously”. Then again, markets didn’t see the border clash coming. They so often miss the obvious.

Like Bloomberg reporting “Highest-Level US Trip to Taiwan in Decades to Challenge China”, as the US Secretary for Health and Human Services) takes the largest and most senior delegation to Taipei for 40 years with an itinerary including meeting President Tsai Ing-wen. The Indian press has also been pushing for New Delhi to swing behind Taiwan to show China that it can take the diplomatic offensive, and not just always play catch-up defence. This is again all highly explosive.

Sticking with things that are easier for markets to get their heads round, but also dangerous, the US and China will review progress of their phase one trade deal on 15 August and, as Reuters puts it, “air other grievances”. Which I presume will include TikTok. It does not take much analysis to see that China is far behind on its pledged purchase commitments from the US. That could be put down to Covid-19, of course. What cannot, however, is Beijing pushing ahead with a focus on the domestic market at the expense of imports wherever possible; and in particular in the policy unveiled yesterday to support the development of integrated chip manufacturing by offering ten years of no corporate taxes. Recall the US still holds the leading edge (with Taiwan) in this field, and China is still a large net importer of them: this looks like import substitution, which USTR Lighthizer will be able to see all the way from DC. Imagine if the trade deal were to *officially* collapse – which is something we see happening eventually. Imagine how markets will react then.

Especially in the case if there is still no big bang up in Washington DC on stimulus by then. The latest is talk of both sides digging in, and of possible executive orders of questionable constitutionality, and all the while as nearly USD2 trillion provided by the Fed sits there in the Treasury accounts and not in household pockets.

Markets at least get an inkling of how explosive that combination is when we see bond yields moving towards new lows. 10-year Treasuries are now at 0.51% and look to be heading for a sub-0.50% close ahead. 2-years are at just 0.11% and heading for single digits. 5-years are already just below 0.20%. Even 30-years are at 1.20%, roughly pricing in four Fed hikes over the course of the next generation. And that’s with most people in the market blissfully unaware of the prevailing geopolitical backdrop.

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Fog of War

China wouldnt dare do that. For instance, its Ambasador to Israhell was clearly assasinated and China did absolutely nothing.

FANFARΟNE ? Year of the Pig ??

I take it you are the medical examiner who investigated the cause of death.

Fog of War

It should be obvious.One day China announces thats its sending a team to investigate the death, the next day it promptly cancelled that investigation without explanation.

FANFARΟNE ? Year of the Pig ??

obvious like flat earth

Fog of War

wow, just wow.

guest

China may have a big economy but its lack the will to act as a superpower. It went along with US on all its wars and sanctions.

KARAMBA

IT WAS POMPEO,NOT ISRAEL,HE WENT TO MURDER THE AMBASADORE ,HE ARRIVED IN ISRAEL TWO DAYS BEFORE THE MURDER,ISRAEL WAS BECOMING TO FRIENDLY WITH CHINA!

lovethemapples

So many things in one page. Its like weekly review

Paul

Sweet dreams.Chinese a****les are getting spanked everywhere as the entire world hates them.The Chinese dragon is going to get squeezed soon….

Not Indian Paul

I’m changing my name

guest

I don’t blame you :)

Not Indian Paul

That’s better

guest

The Indian “Paul” is suffering Raj inferiority :)

guest

Indian named Paul is not kosher or original. You sound stupid anyway.

Dick Von Dast'Ard

U.S. looks like it is reaching the point of no return in backing itself into a unavoidable conflict with China.

China’s top brass can’t simply not react to such a confrontation, as it could be seen as a humiliating loss of nerve and China coming off second best to a country they are learning to despise.

guest

PLA is largely untested until today, the US has a record of starting and losing wars. Only time will tell.

Ivan Freely

Until today? They’re still untested. I always believed the PLA should have got involved in Syria and take out ISIS. What a perfect opportunity to test their policies, doctrine and equipment. They missed a Golden opportunity.

Zionism = EVIL

China will eventually send advisers, currently it is busy consolidating its economic and military alliance with Iran. As Chinese tensions with US escalate regional tensions, Iran presents a robust military capability in the Persian Gulf, Eurasia and beyond. China’s growing arms trade relationship with Iran has posed a counterbalance to US support for Israel and Arab monarchies. China views Iran as a rich powerful ally, and a cornerstone of its search for global alliances aimed at securing its economic and strategic interests and accelerating the decline of US.

christianblood

Very true!

Icarus Tanović

Wall street said so? Hmm questionable and not reliable source.

cechas vodobenikov

China already has a larger economy than USA by PPP—far more advanced than India, despite that India has the 2nd largest population….Germany #6, Russia #5….GDP a poor measure given that US is an oligarchy with among the greatest wealth/income disaparities and widening —now only exceeded in a few African nations, 2 latin amerikan nations—caviar and jets for the rich, burgers and marijuan for everyone else…as US narcissism researcher write, amerikans have become 35-40% more self loathing, grandiose, antagonistic in the past 2 decades—less happy (less money), more passive, more childish, less prepared for adulthood, more alienated/insecure (now they all clutch mobile phones like girlfriends/boyfrinds) and more tolerant….”amerikans accept a level of ugliness in their daily lives nearly without precedent in the history of western civilization”. Yuri Bezmenov
expected in a collapsing empire

Zionism = EVIL

US decline is far more rapid that the USSR and is compounded by the racial and social domestic unraveling.

Zionism = EVIL

China is now the primary global power in every respect and the Americunt dumbasses are dropping like rabid dogs in the streets. The world’s power balance has totally changed. China now has unfettered access to the Middle East and Europe via Iran.

Iran’s efforts to promote its influence in Lebanon are not limited to
its historic support for the national resistance movement Hezbollah.
Iran was the first country to respond to the Beirut port blast and
increase its medical, technical assistance and increase financial and
military commitments to the country.

comment image

<>

Look at that, China helping both KSA and Iran develop nuclear weapons. Isn’t that great? so much here love the Chinese but they don’t understand it has the potential to start a nuclear war.

verner

as long as Iran has nukes they can finish off the jews in palestine and the saudis won’t lift a finger either for the jews or against Iran. on the contrary the saudis will be pleased, in fact exstatic, when the jews are off the map for good.

christianblood

Iranians stated many, many times that they don’t hate the Jews but that they treat Israel as an “illegitimate, apartheid state”. Iranians point out the fact that Iran is home for tens of thousands of Jews and that Iran has more Jews than the rest of the Islamic world combined with hundreds of Synagogues! Iranian Jews have even their representation in the Iranian parliament! The situation is however very different when it comes to the Saudis because the Saudis really, really hate the Jews. Even the ordinary Saudi Wahhabi/Salafist in the street would immediately lynch any identifiable Jews walking in any Saudi street!

More on this in the video clip below:

https://www.youtube.com/watch?v=HHV1QUs-BA4

verner

doesn’t change the fact that Iran wish to see the jews in palestine evicted, full stop. the jewish colony in Iran is a potential quisling or fifth column brigade, not to be trusted since their loyalty, by and large, tend towards the illegal so called country israel, which derives its borders through theft and duplicity and the heavy hand of the disjointed states of A. fortunately the situation in the disjointed states is precarious and it’s more than doubtful that it can provide the heavy handed support it used to provide and thus the desperation in tel aviv. there is no way the jews can survive a confrontation with Iran and such confrontation is quite close now that Iran is making serious inroads in Syria and Lebanon and Iraq. the latter three are ‘arab’ states that the jews used to swat like flies but Iran is quite a different kettle of fish. and the three ‘arab’ states are now seriously armed up and can’t be discounted. so look forward to the early end of the illegal occupation of palestine by the jews.

christianblood

Why then Israel and the US are aiding Saudi Arabia develop nukes?

See it here:
https://www.mintpressnews.com/israel-saudi-arabia-nuclear-weapons/243256/

And here:

https://www.youtube.com/watch?v=MQ_3VhASrms

guest

Saudi Prince Walid’s Citibank has given over $2.4 billion to Trump and Kushner over the years for their ponzi scams.

verner

the ability to close the hormuz is one serious reason why the disjointed donkeys in the white house haven’t attacked iran despite how much the jews in palestine plead for that to happen, and it won’t happen since there is nothing as sacred as the petrol price in the disjointed states of A.

kamalashila

china is not able to take taiwan

chinese fleet can block hormuz cca 6 hours long. after that time will be annihilated.

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