Mohamed A. El-Erian, chief economic adviser at Allianz, the parent company of Pacific Investment Management Company LLC, highlighted the growing energy challenges facing China.
Beijing Loses Dual Discount Energy Lifelines
El-Erian pointed out in his Tuesday X post that China, which had already lost access to discounted Venezuelan oil, is now encountering difficulties with a second source of cost-effective energy – Iran.
His X post underscores the potential impact of the global geopolitical landscape on China’s energy security and economic growth.
The loss of access to Venezuelan oil represents a major setback for China’s energy supply.
This outcome is the result of President Donald Trump‘s intervention in Venezuela, which effectively placed the country within the U.S. sphere of influence and restricted China’s ability to develop and maintain its infrastructure there.
The U.S. has also shifted the flow of Venezuelan oil revenue directly into a U.S. Treasury account.
Despite these challenges, President Trump welcomed China to make a great deal on Venezuelan oil, suggesting that India was already in talks. This indicates that there may still be opportunities for China to secure alternative energy sources.
Beijing Vows to Safeguard Energy Security
On Tuesday, when a Reuters reporter asked whether U.S. actions in Venezuela and Iran could hinder oil supplies to China, citing analyst views, Foreign Ministry spokeswoman Mao Ning said Beijing “will do what is necessary to safeguard its energy security.”
El-Erian noted that this comes as China’s 2025 strategy to drive growth through global export expansion, aimed at offsetting declining U.S. shipments, faces mounting challenges.
The risk posed by Iran adds to the growing pressure. Last year, Saudi Arabia, Iraq, and the UAE together exported more than 13 million barrels of crude per day through the Strait of Hormuz, most of it headed for China.
Those shipments are now also at risk following Iran’s closure of the Strait of Hormuz.
The prominent Egyptian-American economist cautioned that the export-driven growth approach “looks increasingly difficult to repeat.”
Photo: Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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