View / How the Iran war is playing into China’s hands

Five weeks into the Iran war — with the Strait of Hormuz still effectively shut, sending fossil fuel prices soaring, and the conflict threatening to expand rather than contract — there’s at least one clear winner: Renewables technologies such as solar, wind, and batteries.

All are dominated by China.

Even before the war broke out, experts had characterized the global struggle for the future of energy as one between a group of “Petrostates” led by the US — the world’s largest oil and gas producer — against “Electrostates” anchored by China, which supplies more than 70% of all the world’s green hardware.

The war has sharpened that contest, by showing once again how vulnerable the global economy is to shocks emanating from the Middle East. Crude prices are at multi-year highs, and threaten to surge further, raising the specter of a global recession; natural gas supplies are also at risk, with attacks on LNG infrastructure in Qatar, a major producer. And around the industrialized economies of Asia, desperate governments are turning back to coal to fill the gaps.

At the same time, a planetwide switch to green technology is underway. And that is putting Beijing in position to emerge from this crisis, whenever it ends, with prospects of a stronger grip on global energy, an enhanced manufacturing base, and a world increasingly locked into Chinese supply chains.

Asian economies, which take the vast majority of the crude and LNG that passes through the Strait of Hormuz, were the first to reach for green buffers after the US and Israel began striking Iran. In India, sales of electric rickshaws and induction stovetops are booming. Drivers in Thailand are switching en masse to EVs to avoid miles-long lines at gas stations. Indonesia is speeding up solar and geothermal power projects. In Europe, the green transition is gaining new momentum too. The UK has rolled out rules requiring heat pumps in most new homes. In Germany, Janik Nolden, the chief executive of Solarhandel24, a company that sells solar panels, reports that calls from prospective buyers have tripled, telling Bloomberg: “A switch was flipped.”

There are good reasons to believe that Beijing will extend its gains long after the Iran conflict ends.

First, the world’s embrace of green technology to counter the war-induced energy crunch is accelerating existing trends. According to Fatih Birol, the Executive Director of the International Energy Agency, renewables accounted for 85% of all new global power capacity added last year. Solar led the way. Consumers are also highly motivated to find homegrown energy solutions; they’re going green not to save the planet from global warming but out of practical necessity. It could be years before LNG supplies from the Gulf are fully restored, given the damage to infrastructure from Iranian drones and missiles, and by the time that happens, many homes will have already pivoted to technologies that don’t leave them reliant on the Middle East.

On the supply side, China is a green colossus, with enough production capacity to meet its own needs — Beijing is installing solar panels at a rate equivalent to one nuclear power station every day — and sufficient left over to green the rest of the planet, too. In fact, Chinese automakers, grappling with a domestic slump as a result of industry overcapacity, are now betting on overseas markets to fuel their growth, and investors are anticipating a bonanza as they do so. The share price of Geely, a Chinese EV giant, has gained around 30% since the war began; CATL, the world’s largest battery maker, has rocketed 28%.

China, the “Electrostate,” has been planning for this showdown with America, the “Petrostate,” for more than a decade.

Indeed, the country’s turn to green energy was always a political project more than an environmental one — to make itself less vulnerable to external energy disruptions and coercion, to cement its global manufacturing dominance, and to make the world reliant on China’s end-to-end supply chains to entrench Beijing’s geopolitical clout.

Writing in The National Interest last year, Tatiana Mitrova and Anne-Sophie Corbeau, researchers at Columbia University’s Center on Global Energy Policy, predicted “a volatile, asymmetric contest for energy dominance, pitting hydrocarbons against electrons and defining the energy and geopolitical landscape of the next decade.”

That competition has just taken a decisive turn, in China’s favor.