Amidst escalating energy costs linked to the ongoing Iran conflict, countries participating in China’s Belt and Road Initiative (BRI) are seeking support from Beijing. However, China is reportedly restricting fuel and fertilizer exports to safeguard its own energy security, causing concern among its partners who anticipated assistance.

Growing Concerns Among BRI Nations

Clients of the expansive Belt and Road Initiative are appealing to China for help in addressing soaring energy prices. China has offered limited aid, instead focusing on bolstering its own energy reserves and economic stability by curtailing fuel exports. This response has created political challenges, as China previously made substantial pledges of energy and economic security to nations within the BRI network.

Contractual Obligations in Question

These commitments weren’t merely informal assurances; they included legally binding contracts. Countries like Bangladesh and Thailand, both BRI member states, are experiencing China’s reluctance to fulfill previously agreed-upon fuel and fertilizer shipments during the current crisis. This highlights a shift in priorities towards internal energy security over obligations to BRI partners.

Export Restrictions and Reduced Shipments

China’s decision to restrict fuel exports, particularly refined fuel, began in mid-March, primarily to increase its gasoline stockpiles. Despite pressure from affected BRI clients, projected fuel shipments for April are estimated between 150,000 and 300,000 metric tons – a significant decrease from initial forecasts.

Limited Communication from Beijing

Chinese officials have largely remained silent regarding the export ban, vaguely suggesting potential fuel allocation to regular Southeast Asian customers in the coming weeks. Recent reports indicate Chinese tankers arriving in the Philippines and Vietnam, but it’s unclear if these shipments were arranged before the restrictions were implemented. Shipments that cleared customs before March 12 were reportedly exempt.

Beyond Fuel: Fertilizer Concerns

Concerns extend beyond fuel, with Malaysia and the Philippines expressing worries about potential disruptions in Chinese fertilizer shipments. China is a major global fertilizer producer, and the timing of these adjustments coincides with the Iran conflict, impacting goods flow through the Strait of Hormuz – a critical route for roughly one-third of China’s seaborne fertilizer shipments.

Impact on Global Food Security

Projections suggest a potential halving of China’s fertilizer exports during March and April, potentially impacting global food security. According to BMI senior commodities analyst Matthew Biggin, China’s restrictions demonstrate a commitment to prioritizing its own food security and shielding its domestic market from price volatility.

Prioritizing Domestic Stability

China’s strategically accumulated reserves are being carefully guarded. Despite the urgent needs of its Belt and Road partners, Chinese officials are hesitant to draw upon these reserves. Even while receiving oil shipments from Iran, China is leveraging its fuel reserves to stabilize domestic retail gas prices.

Ripple Effects Across Southeast Asia

This self-preservation approach has led to consequences across Southeast Asia, with several countries instituting fuel conservation measures impacting productivity. Sri Lanka and the Philippines have experienced labor unrest, with transport unions striking to demand government fuel subsidies. These disruptions underscore the ramifications of China’s energy policy on the economic stability of BRI nations. The situation highlights the complex dynamics of the BRI, particularly during global crises, and the growing disparity between China’s needs and those of its partners.