00:00China is building new routes to move oil and other goods quickly to and from the country,
00:05and one of them is a 10,000 kilometer long railway link to and from Iran. But in a world
00:12still dominated by tankers and with the ongoing crisis in the Strait of Hormuz,
00:17how much does one land link move the needle? Not much. It's a simple fact of numbers,
00:26let's say. I mean, most of the oil that transported to China, especially from Iran,
00:32right, travels on what they're called very large crude carriers, VLCCs.
00:39All right, you might be surprised by that answer from China expert Andrea Giselli.
00:43I was, but it's kind of the key to this story. Giselli is going to help us understand Beijing's
00:49reasons for the investment and more importantly, its preparedness for global shocks. Is China,
00:57of all the countries on the planet, the best equipped to navigate its way through this energy
01:02crisis that has rocked economies around the world? You can say that it shows all those preparations
01:08that the Chinese have made over the decades and so on are working because they, because again,
01:15the issue of energy security has long, long been on the agenda of different Chinese leaders.
01:21Um, and so it's, it's pain out. No, it's, it's, it's pain itself. Um, uh, there's no doubt about it.
01:29So I think the surprise, I mean, people knew that China was interested in energy security,
01:35diversification and so on. But I think this crisis really brings the difference in their preparation,
01:41especially our lack of reparation really in a sharp relief. Uh, I think this is, I think this is the,
01:48the point. It's not just surprising Chinese policies, but really the gap that exists on this issue
01:55between us and them. Let's delve into that. Why are they so prepared? And since when?
02:01I mean, China has been thinking about this issue of dependence for a very long time. Dependence,
02:07broadly for not just oil dependence on anything outside for a very long time. And oil, of course,
02:13always been at the very top of the thinking since China became a net importer in the, in the nineties.
02:19So they've been preparing for a very long time, but let's get back to the railway line that allows
02:25China bypass the Strait of Hormuz. Is the 10,000 kilometer long line actually a game changer?
02:32It's faster, but how much capacity does it have? Each of these ships can more or less carry roughly
02:40between 600 and 700, um, uh, thousand barrels, right? Um, which is a gigantic amount, right? At the same time,
02:53the typical train can move only up to 60 to 70,000, right? So just the scale of the single,
03:02you know, unit,
03:03the single means of transportation that is used. So we're talking roughly 10 times smaller. Realistically,
03:10can this railway ever compete with the scale and speed of tankers? It tells us that this train, uh, alternative
03:18can only be limited. And of course the train takes less time. Uh, but it said it's, uh, as far
03:26as
03:26I understand it, this, this railway is not really, um, completely or fully operational. It's working
03:32since last year. Uh, but nonetheless, there are still some obstacles. I think about customs crossing
03:37borders and so far and so on. And therefore some of the most optimistic, um, you know, uh, calculations,
03:47they show that in any case, these train, these, you know, these trains configure for long haul
03:54transportation can really rarely even exceed 100,000 barrels per, you know, per route, uh, per travel.
04:03So this to say that really to just match one of these gigantic ships, one of these gigantic VLCCs,
04:10Iran would actually needs about between 25 and 35 trains, which at the moment are simply not available.
04:19So even in a crisis, this isn't something you can just scale up overnight. Is that the real limitation here?
04:26So they say that of course, if you know, these, uh, the crisis state of almost continues, um, China is
04:33more than interested in diversifying, not just the number of the, the, you know, its suppliers,
04:39but also the modes of transportation for oil. And of course, Iran is even more interested in ensuring
04:44the flow of oil, uh, keep on going. Um, so it is possible that these, that this railway link can
04:52pick
04:52up and actually end up moving, uh, non-significant, non-trivial amount of oil. But that said,
04:58it will take time and it can not really match seaborne transportation nonetheless.
05:03If it's so constrained, why invest in it at all? What's China's game here?
05:08Well, I think it, I mean, there is no silver bullet for, you know, to achieve energy security,
05:14you know, just expanding, adding one more supplier is not going to change your situation usually,
05:19uh, adding a bit more oil from another country is not going to change that as the same is here,
05:25right? Just the railway alone cannot change the situation, but China can definitely, you know,
05:31decide to import a bit more from one countries. And of course you can smoothen that in many ways,
05:37but that doesn't change the minimum friction, right? There's always, there will always be a
05:41certain amount of friction. Something can break right on the railway, stopping everything.
05:46Um, and so of course we can imagine this railway link again picking up, but there will always be
05:53limits. It's not going, it cannot substitute seaborne transportation. There's no doubt about that.
05:59It can have to supplement it, right? But not substitute.
06:04This isn't about replacing sea routes then. It's about reinforcing them. But zooming out,
06:10does this point to something bigger? Is China simply better prepared than everyone else when it comes
06:17to logistics and supply chains? China is definitely a whole league of its own. I mean,
06:22beyond the specific case of transporting oil on railway, um, it's quite clear. I'm quite familiar with
06:31figures from, uh, for example, South, from, from Asia. So if you compare South Korea, Japan, India, and China,
06:39um, for this, what at least the data up to 2024 indicate that 2025 are not available yet, but it
06:49showed that overall China has been far more successful in, you know, in, in decreasing its
06:56reliance on Middle Eastern oil than especially South Korea and Japan. How much of this comes down
07:01to long-term planning versus reacting to crisis? Not just about the fuel at the pump. It's not just
07:08that because petroleum products and other, um, things that are produced as, for example, helium,
07:15right, is, is produced during the extraction of LNG. And this is critical for the, for, uh, for example,
07:21chip making, right. And of course we saw inflation in China increasing for the first time after a very
07:28long period of deflation. So the railway might not change the game on its own, but it does reveal
07:35something much bigger about how China thinks ahead. And it raises a couple of big questions. Is China now
07:43better prepared for a global crisis than the West? And if the next shock hits, who's actually more
07:50vulnerable? Let us know what you think in the comments. I'm Pablo Foley-Elias. Thanks for watching.
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