The End of Petrodollar and Dawn of Global Thermoeconomics

Added: 2026-05-10

[00:00:00]and welcome to a new podcast from the Belt and Road Institute in Sweden. My name is Hussein Askary. Today is Saturday, May the 9th. It's Victory Day again on, you know, against fascism both in I'm joined today by Warwick Powell from Brisbane and Australia. Thank you very much Warwick for joining me.

[00:00:20]It's always a pleasure to join you. The sign Thank you.

[00:00:26]We have today a very, very loaded theme on the. Massive change, historic change in the global energy supply systems, not only oil and gas, but the whole system, which Warwick has written a whole book about recently. And I encourage everybody to order the book. It's called Thermodynamics in a Time of Monsters.

[00:00:52]And I have ordered it, you should order it our discussion generally is on the crisis in Iran and the West Asia, so-called Middle East and the closing of the Hormuz Strait Hormuz soon.

[00:01:06]the enormous impact on the global energy supply chains, which has a ripple effect on every supply chain in the world in industries and so on and so forth. So this is the main theme of our discussion. We will also discuss some historical background to previous energy. Crises like the 1973 and what does have that to do with today, the Petro dollar, the genesis of the Petro dollar and now probably the death of the petrodollar system. But we will also discuss some other issues. But first of all, I would like to take your take, Warrick. We cannot avoid it, President Trump. Is visiting Beijing next Friday.

[00:01:47]And this is, uh, you know, for me, I was an interview. I said, well, it doesn't really make sense for Trump to go to China now. What does he have to offer? What do the Chinese expect from him? But from your standpoint, just people understand you are an Australian citizen. Active Australian in politics and in. From, you know, the public life generally, but you have a background from China, you are an observer of China and you have a very good contact with the think tanks and the experts in China. So we want to have your take from your perspective on the visit by Trump to China, meeting with President Xi Jinping. What? How do the Chinese see this summit?Look, great questions are saying, and this by the way is my 50th year in Australia and and I think in that time I have finally mastered the Australian accent. The I am of course, as you say, you know. All connected into the Chinese world. And of course, I'm from Hong Kong originally and I've literally just returned back to Australia after an extended visit to the mainland, partly to visit family and friends and also to catch up with some professional colleagues in industry and think tanks.

[00:03:17]30 universities and also within the the government space. This issue of President Trump's visit to China, of course, has generated quite a bit of discussion, in large part because of sort of two overlapping issues.

[00:03:33]One is the complexity of the bilateral relationship. In any case, but also the timing, given that the the visit that is coming up next week is a delayed visit from one that had been scheduled for about a month or so ago and that was put off in large part because of the war initiated by the Americans and the Israelis against Iran.

[00:03:59]The main reason why I think from the Chinese point of view that despite reservations the meeting is proceeding, it's because the leadership in Beijing understands that the world at the moment is in an incredibly turbulent moment where in fact not engaging. The Americans probably has greater downside risks for global stability, not to mention the bilateral relationship, than to engage with Washington. And that, on balance, keeping Washington at the table and being able to have these kinds of dialogue is ultimately a more sensible thing to do. You could say that this is the attitude of the adults in the room. The other thing, though, is that there are some issues that I think the parties will seek to at least create some some headway on, if not final resolution. Obviously, the legacy of the trade wars from last year continued to cast a shadow and. The issues had only been deferred and kicked down the road from the meeting in Boston last year, last September in the Republic of Korea and I think that there is a need to at least stabilise that so that everyone concerned at least knows what the next six months or 12 months window might look like. This one. I think the second issue is also going to be around this question of artificial intelligence and where that all sits. And there is. Quite a lot of talk that whilst both sides are a long, long way apart from each other that they realise that the issues are serious and at least being able to establish some guardrails or some guiding framework for. Bilateral engagements is going to be important. Where that will head to in six months, 12 months, two years time, who knows. But I think the realisation is, is that being at loggerheads on the issue of AI, particularly its application in the let's just be nice about the defence sector. The war making and the war making and killing the. Histories is something that is is is serious enough for the parties to try to have a way of working towards some sensible, not only bilateral outcome, but eventually through that, because they are obviously the two global leaders in this space have an impact on. From the rest of the world. So. So that's my sense of this particular meeting coming up. I I mean, what do you think? I mean, you've only just come back from China yourself. So I'd be interested to hear what, what, what feedback you've gotten. Yeah, no, definitely. I was there like 2 weeks promoting my new book in both English and Chinese. It's about the Belton Rd. in West Asia, Middle East and also in Africa. But when I was there, I mean, I was asking people around about the, the, you know, the China's role in the, in the struggle going on in West Asia and the war in Iran, but also the relationship to the United States because they. Chinese officials keep saying emphasizing the China US relationship is the most important relationship in the world. While I have said that many, many times and the problem is that you have completely two different cultures working here and if the United States. Continues to see China as the big danger, that the China is the big prize of regime change, that China should be undermined, should be contained. You know, how could you have a rational relationship with such a partner? And therefore people in China are split. But I think they rely very much now. On the self-confidence that has been generated that the United States can no longer push China around or China's partners too. I mean, last week it was very interesting. Maybe you brought up the let's talk about the, the, the weapons, the arms that the United States is using in these wars.

[00:08:14]And they would not be possible to produce without Chinese inputs anymore. And this kind of, I, I guess Trump wants to, that this will continue, that China will continue to export these inputs to the United States. But I don't know what the Chinese reaction will be, but the Chinese are making it. Clearer that they no longer play with the old rules. There are new rules here. There's a new sheriff in town or there's a new situation. And for example, last week the Chinese, I think Commerce Department and I would like you to also interpret the decision because they said they will not. Abide by American sanctions on Iranian oil imports, oil Iran sells to Chinese refineries. So not only they, I think they, they, they, the language is very interesting because they say not only they would not abide by, but they will punish anybody, any. Chinese company who will listen to the Americans and you know, stop shipping or refining Iranian oil and so on.

[00:09:22]the rules of the game have changed and that these are not going to be discussed anymore. And I think it's interesting. From your standpoint, because you wrote something short about the the the communique from the from the Commerce Ministry of China. Yeah, but there are new rules here, there are new ways of playing the game internationally. Yeah. And a lot of the pushback, if you will, is really an assertion, firstly of international law in the sense of saying that America's interventions, such as its sanctions, do not have weight in terms of international law because they don't have the.

[00:10:11]Backing of a resolution of the Security Council that's in many regards the foundations of China's position. So China's responding not in a like for like way saying well we're just going to unilaterally reject American long arm jurisdiction China's.

[00:10:32]Position is actually we're going to reject it because it's not in compliance with international law and it's doing this in a few arenas as well. The situation in Panama is an example of that where the interventions over the last.

[00:10:52]Six or eight months by the Panamanian government, clearly under pressure from the Americans to rescind the contract to operate the facilities at the Panama Canal by Hutchison, Whampoa or one of its subsidiaries. So Hutchinson is a Hong Kong registered company owned by Hong Kong Chinese. People to ultimately seek to what from an American point of view is to wrestle control away from Chinese interests, Well, Chinas responded firmly to make it clear to companies who are considering operating those facilities, and these are very seriously large companies. Involved in the business of trade such as mask, China has made it very clear that these interventions by Panama at the behest of the Americans are also in contravention of international law and in contravention of, you know, fair dealing and, and so China won't. Divide won't won't put up with it and they've put these companies on notice that that China won't do business with these companies should they go down this path. This is a challenge, of course to these companies because the majority of their business comes from doing business with China. So China is responding via economic means in. In part, but as a way of demonstrating A commitment to the importance of international law to enable companies to go about doing their business, legitimate business, lawful business, without the interference of particularly the US. Now this response to the Iranian oil.

[00:12:32]Sanctions is, I think probably the most explicit statement, and I think that's where you're getting at, is that for the first time it wasn't just a case of quietly abiding by American sanctions without making too much of A fuss about it, but having some workarounds. Because Iran and China of course, have a strategic agreement and there has been transactions over the course of. You know, quite many years and many of those transactions have been either through Baker arrangements or outside of the SWIFT environment facilitated by a certain banks inside China interacting with banks in in Iran. And that's all been done sort of a little bit on the quiet though, you know, in a sense.

[00:13:13]Everyone knows about it, but for the first time the Chinese authorities actually gave an instruction that America's long armed jurisdiction is not to be abided by, and that not only would companies be in breach of Chinese laws if they abided by them, therefore at risk of being punished in one way or another. The Chinese government also said that should the Americans try to do something to you about this or punish you or seek retributions against you, that the Chinese government will back you. Now this wasn't just a message to the refineries in China. This is actually a message to the world and literally saying. That the days of American long armed jurisdiction are over. Yeah, that's what's that's what is new because that this was against international law.

[00:14:02]The Chinese knew this for many years.

[00:14:05]But because of these so-called secondary sanctions, if you deal with Iran anyway, you will be punished indirectly. Through other means. But this is what has changed. The world has changed because the power, economic power has changed. And so anyway, but now we have walked into our main subject on the oil and gas, Iran and the whole situation in West Asia so-called. At least we have now. I mean, the, the head of the International Energy Agency said the energy crisis we have now is unprecedented in world history. I mean, I think everybody agrees on that because it has such a global outreach, but also it has so much ripple effects on every. Another sector of global supply chains, not only energy supply chains, but industrial chains that this is really, I mean, it's only comparable to the 1973 oil crisis, which I'm going to say a bit about it because it's very interesting because that was the birth that was after the end of the Bretton Woods system immediately. And the birth of the petrodollar system. But we have now, and also, as you discussed in several articles, but also in your book, I think that we will see a shift in the global energy, in the whole energy system. The thermodynamics of world economics will change. And I agree with you, but I think also that not only that nations will try to diversify from fossil fuels to more renewable energy, but I also suspect my own view many nations who have coal, oil and gas but have been restricted by. Either reputation or financial considerations, economic consideration not to now they will invest into that. If they have coal, oil or gas underground, they will try to get it out. But also we have we will see a total shift in Chinas role and this has been very clear but. I want you to give us a breakdown of how you think this system is shifting. The thermoeconomics. What is thermoeconomics and what is the shift?Look, at the heart of human societies is energy right? Whether it's energy for people, which we generally absorb, but not only absorb by by by eating things and having nutrition and stuff, but we also have fuel for machines and over the course of the last 200 years or or thereabouts. Let's say 300 years human societies in broad terms, though not every society in practical terms has been able to exploit what is ineffective and incredibly efficient from an energy point of view energetic resource. So I start with the basic idea that.

[00:17:08]We we need to look at the physics of the world started with coal, oil, gas, nuclear, coal, oil, gas, yeah, so, so and, and these resources and the ways and the technologies and tools that humans are developed to access them, transport them and then convert them into usable. Useful work usable energy delivered incredibly high energy return on investment on energy investment.

[00:17:35]So the ratio of energy expended to harness this energy source was very low compared to what you got oil would you'd get 150 units of. Energy back for every unit of energy that you expended, broadly speaking. And and so it was an incredibly energetically efficient process which then enabled these societies to rapidly develop all sorts of other things because that additional surplus energy. The effect could be committed to building infrastructure, building fixed capital, you know, buildings, urbanization, hospitals, investing in people to do research and development, you know, medicine, social and cultural pursuits, you name it. Sports stadiums.

[00:18:29]Et cetera, et cetera. And that energetic system has been, I guess, a part and parcel of what we call industrial life for the best part of 150 to 200 years. The issue with that industrial system is that the energetic resource.

[00:18:50]Is now less efficient to harness than it once was. We don't get as much energy back for each unit of energy that we commit to harvesting what's available.

[00:19:00]And in some parts of the world, it's just not available in the way that it once was anyway. We also have situations where there might be abundant resource.

[00:19:10]But it's actually still very energetically expensive to harvest the next unit of energy. And a typical example of that is actually the American shale oil industry, where 20 years ago when we had the so-called shale revolution, the energy return on energy invested in American shale was incredibly high because it was. Relatively easy to access the shale oil that was available in the basins and it didn't take a lot of energetic effort, but very quickly the energetic efficiency of those resources is depleted so much so that in fact of the major basins, the only one that really. Continue to deliver was the Permian Basin and in fact over the last 15 years the Permian Basin has been the only one that has been delivering continued output. The problem for the United States system is that the Permian Basin is actually declining as well. And, and, and we know this, you know, the whole bunch of studies being done. Shows that up until about 7:00 or eight years ago. You know, the, the, the amount of effort that was made to get that next unit of, of shale oil was, was relatively stable, but it went over the Cliff eventually and you had to make a lot more commitments of effort. This happened actually during the Obama days and more, more rigs had to be deployed by a factor of 10 in economics usually. The the diminishing rate of return because you, you need to dig deeper, you need to explore larger areas and with concentration and so on and so forth. That's right. And so obviously there's a finance component to it. But if you just looked at this from an energy accounting point of view, it was actually energy we are talking about the. Physical economy now, not the money side, Yeah, yeah, I mean, it was also more expensive financially too, but but yeah, just the physical economy or the energetic economy. And. And so the United States now is actually confronting a situation where systemically across its overall energy system, it's actually experiencing. Progressive and reduction in overall energetic efficiency and, but I I guess the issue with, with the with with the overall system at large at a global level is that parts of the world still have plenty of reasonably accessible, energetically efficient resources in the ground. The Gulf region in West Asia, West Asia, parts of Russia and parts of Africa and, and, and you know, those resources are there and, and in in fact parts of Australia as well in terms of gas and that sort of thing, but not everywhere. And China is one of those places where. Not only for energetic reasons, but also for security and sovereignty reasons. About 20 years ago, it began embarking on its own strategic restructuring of its economic base. From an energy point of view, of course, as most people wouldn't would recall, in 22,000 and Three, then President Hu Jintao talked about the Malacca dilemma. Which was the risk that the Strait of Malacca, which is an even narrower ocean passage than the Strait of Hormuz, could be blocked by the US, thereby impeding China's access to oil from West Asia. And over the course of the last 23 years, China has made incredible efforts. To diversify its sources of oil, that's the first thing it's done. Secondly, to transform the efficiency of its own domestic oil and coal production systems, it's added to those with other energy sources, some nuclear. But the big expansion in the last 10 years has been wind and solar. Then it's added.

[00:22:59]Into that system, battery storage systems, hydro systems, and now of course, it's the downstream uses of the electrification process to a point now where China's energy dependency on oil is about 15% of its overall energy requirements and not all of that's imported. So that's taken a long time to achieve, but it's also enabled a technical capability to harness other kinds of energy from nature. There's also leading work in things like fusion and and stuff as well. Right. It's for for the next down the road for the next generation, yeah. Right. So and, and the thinking around that is around 2020, 35 to 2045 is where it will really start to establish a foothold and by the time the solar and the wind technologies in a sense begin to reach the end of their useful life around 20402040. Thrive, right? These other things will be in a position to take over. So that's just structural change in the world. Yeah, Unless you have another key point you want to read. I want to expand this from, you know, you talk about China, you talk about the United States, you talk about China. But now I want to discuss what is the impact on the global economy, the global economic power. Because with the United States having this shale oil and all this victory they have achieved is having diminishing returns on investment.

[00:24:30]But also we have a massive energy crisis in Europe, self-inflicted because of the war in Ukraine, because of, you know, the North Stream. Destruction, but also that the Germany, for example, moved away from nuclear power and also coal power. So we have a deep crisis, which means the industrial power of the United States and the EU and the so-called new AI revolution, which depends very much on.

[00:25:01]Energy uh, they will lose that to China and maybe other parts of the world where there's cheap energy. So for sure, for sure look, I mean AI is such an amazing clarifier because AI is really just embodied energy, right it's just. Electricity and, and, and we now know that China's energy stacked together with its AI technology, is delivering outputs, you know, computational outputs at an energetic efficiency higher than the American system is Jensen Huang, the founder and CEO.

[00:25:42]Of NVIDIA actually observed this about a month ago, made the observation and and I'm not sure that it's really been internalised yet amongst the American and Western sort of analytic world, the commentary and the think tanks and policy makers, but you'll remember that late last year. I think it was the American energy secretary, Secretary Wright came out and said that the United States is short by about 100 gigawatts of firm capacity because of AI. And of course, the big call was for the energy system to respond the electricity supply. System to respond to meet this requirement of of the AI industry. But you know, it's one thing to have ambition, one thing to say that you want to do something you've got to have the material means to do it. And the American electricity supply industry has struggled to respond sufficiently. Why?Not enough skilled workers to work in a high voltage environment? One. Not enough Transformers for the network augmentations. Why? Well, because the Transformers are actually imported from other countries, many of which are from China. But not only from China. There's a three-year backlog for them. Already why is that well, because global demand number one, but also because it takes certain skills and competencies to make them and it also requires input such as copper copper is tight at the moment right so you start to add these things together and the compounding effect literally means that the United States position in terms of its. The eye competitiveness is actually not being constrained by how clever their mathematicians are and and those people, it's actually being constrained by the fact that they can't roll out electricity systems fast enough. That has other implications, of course, because there are other industries that need electricity as well. And so every time I data centers are being. Build It's actually causing electricity costs to rise, which is adversely affecting other industries. We know this because there's report after report after report that other American industries that are electricity exposed and dependent are under the weight of increasing electricity costs. Then you've got households and communities. So wherever there's been a data centre, the average price of electricity for households has gone up about 8%, sometimes even 20%, right. This is very, very significant.

[00:28:16]And one interesting side effect of is that many industries and businesses, they can't find enough skilled engineers anymore for their own businesses because.

[00:28:25]Everybody's going to these data centers.

[00:28:27]Yeah, Correct. Right. And And so, you know, the economists call this a Dutch disease, right? Where a boom in one industry actually undermines or adversely affects every other industry because it sucks resources out of them all. It drives up the price of these inputs or labor costs. And it actually adversely affects every other industry. And once the boom's over, you actually see sort of the legacies of it with with with industries that just never have never been able to regain their competitiveness. Also the financial markets of the United States is the almost all the growth 6070% of the.

[00:29:07]Growth in the stock markets is because of this bubble. Is this the only.

[00:29:13]It's only because of this one. And yeah. And so it it's symbolically important in terms of the American narrative as far as public confidence is concerned, as far as the legitimacy of the the Trump regime is concerned. And there's all these pressures are being built now, you know, this war in West Asia is having an effect on the American gasoline market. Now you're, I mean, you know, better than anyone else. You know, you listen to the American politicians say, ohh, look, this straight of Hormuz thing, it's not really our thing.

[00:29:48]We don't use it. The Americans doesn't affect us. It's really someone else's problem. But it's not true. Of course, you know, we know that gasoline prices in the United States has gone up to at minimum about $4.60 a gallon, in some places up to six, 7-8 dollars a gallon.

[00:30:06]Chicago, LA. And this is this is major, you know, tipping point stuff. And and this is all because the United States market is actually not immune. Yeah. And people always people say things like, ohh, you know, well, the United States is energy self-sufficient, exports more than it imports. Well, yes and no. It depends how you account for things. the United States is actually a net importer of crude oil. It's a net exporter of energy once you include refined products, but it can only do some of those refined products because of the net imports of crude that it does at the moment last week. So that's actually exported more crude than it's imported, which is unusual. Also, the quality of the crude that they need for the refineries is different than the one produced in the United States. They needed this heavy crude from Venezuela, from other parts of the world and for different purpose, right? So the different crudes enable you to distill. Different things, you're distilleries are set up or your refineries are set up to handle different products so that you can produce other things, right, whether it's jet fuel, diesel, gasoline or what have you. And the the issue is, is that the United States is actually exporting and its exports have increased over the last few weeks. But that's just by drawing down on its strategic reserves. And so because there's a lot of, you know, the price has gone up. So if you're an oil trader and you've got reserves, I mean, you know, this is a time to make pay. So the financial signals are actually incentivizing the American industry to actually deplete. American reserves, which of course in three months time is going to have serious implications on American gasoline prices at the pump. And then there's the issues of fertilizer, diesel on agriculture and all of the other chemicals that American farmers are screaming now. I listen to them. I have some friends in the United States who. Deal with the farm, the farms community and they are really, really hit by this crisis they can't even find fertilizer, they need diesel for their machinery and so on and so forth but this brings us to the impact on the global economy because what I fear is we will have a on a certain level because in the developing sector and the. Global S, you know, we have talked about China, we talked about the United States, Europe, but I think there is a major crisis now coming up in the global S where many nations are dependent on imports of oil, fertilizer, food and they will end up not only shrinking it.

[00:32:50]Economy which will again affect everybody else, but they also might have famine. We might have other crises. In addition, we will see a repetition of the 1973 crisis which led to the global debt crisis in the global South and Latin America and Africa, Asia and so on and so forth.

[00:33:08]I mean, I would like just to mention.

[00:33:11]Something I know personally and I, you know, this is one of the things which have contributed to my interest in international political economy because when I started working at the American magazine Executive Intelligence Review offices in Germany, I shared the my office. Room with the Mr. William Engdahl. We shared the same room. He's the author of this very, very important book. It's called The Century of War, Anglo American Oil Politics and the New World Order. And fascinating book. I was translating it to Arabic at the same time, but when then we discovered that it was being pirates.

[00:33:51]Translated in serious I stopped translating it because everybody this should be a textbook for international political economy and also a history of the so-called Middle East. But it in one of the interesting chapters, he talks about the 1973 crisis. You know, the in 1971, Nixon ended the Bretton Woods system. Decoupling the dollar from gold and that created a certain crisis. Oil prices were very, very low. But then there was a very interesting meeting of the Bilderberg Group, the famous Bilderberg Group here in Sweden, in Saltsjöbaden, in a resort.

[00:34:30]And he says that in this actually.

[00:34:33]That at this secluded island resort of the Swedish Wallenberg banking family at Saltsjöbaden, Sweden. This is in May 1973. This is five months before the war broke out between Israel and Egypt and Syria, which led to the Saudi boycott oil. But this is five months before that. He says that this gathering of Prince Bernhard's Bilderberg Group heard Walter Levy outlined a scenario for an imminent 400% increase in OPEC petroleum revenues.

[00:35:10]The purpose of the secret South Shore Badan meeting was not to prevent the expected oil price shock, but to plan and manage the about-to-be created flood of oil dollars, a process US Secretary of State Kissinger later called recycling Petrodollar flows. Now, the reason I believe what William Engdahl says here is because I happen to have the minutes of discussion of the final session of the meeting. Very, very interesting.

[00:35:47]I mean, there are prime ministers of Sweden, Norway, and Olaf Palma was Brazinski was there. The heads of all the major banks and oil companies of the world were there. And it confirms exactly what William Engdahl is saying here, because they expected this war. Happened Kissinger personally orchestrated the war Now the reason I know that is that Saudi Arabia's oil minister at the time, Ahmed Zaki Yamani. He had a.

[00:36:19]Uh, energy think tank in London, he still That's why I contacted them after I read the book and said, I told them, look, I have something interesting for you because this book proves that it was Henry Kissinger who orchestrated this whole crisis, not you. Because, you know, in all the media they blamed the Arabs.

[00:36:39]And the Saudis for this. And yet Zaki Yamani became the point person because he was the oil minister of Saudi Arabia at the time and everybody blamed him for that. Soaround to people because he said personally that when he went to the United States. Before the war broke out, to tell the US president to intervene, you know, to deescalate this crisis, because if this happens, then Saudi Arabia had no other choice than siding with Egypt and Syria. And what weapons do they have? The oil weapon, they said they will. We will cut the oil. That's the only weapon we have. And Yamani says.

[00:37:24]When I walked out from the Oval Office, Kissinger pulled me from my arm and pulled me into a room. Kissinger was the national security adviser then. That was five months before the conferenceI told you and he said he told me, you don't mention this threat to anybody. And he said I had a scheduled press conference that evening with all the major American media, nobody showed up because Kissinger had told everybody Nobody listens to this guy. This is all nonsense. And you know, lo and behold, five months later we have the war, we have the oil boycott as well. So this recycling of the Petro dollar became the new world order and nations around the world, they had to borrow dollar, which has become expensive now. To buy very expensive oil and that was the basis for the debt trap for most countries in the global South and this also started the Petro dollar system which we.

[00:38:34]Which we experiencing the end of it and because what we have seen is that, you know, the the emergence of not only China, but the idea that the BRICS countries, they want to use their currencies and the, you know, to end the hegemony of the American dollar and the long-arm justice of the United States and pressures. But this is really what I'm afraid now is that we will have a new debt crisis in the global South, especially because in the North they can afford to print money, but in Africa, in in Asia, they in Latin America, they cannot afford to print money. So they will have to borrow money.

[00:39:15]To buy oil, fertilizer, food and air, all kinds of goods which will go up I think it's, it's, well, it's possibly even worse than that. It's not. Only that they need the borrowed dollars, but that because of the parlous position that they'll find themselves in, particularly in terms of things like agricultural production and exports, the value of their own currencies will be hammered and and they literally won't be able to keep up with some of their dollar denominated obligations. So. Not only will they have to borrow, they're actually going to be in even more difficult positions to deal with the aftermath of the borrowing because of foreign exchange devaluation from their own currencies point of view as a result of the problems that are going to unfold for. Some of their economic sectors, right. So I think that that there are some very, very significant risks for some countries, especially those who are heavily dependent on imported diesel and and you know, there are many countries in the world that export things. Earned dollars specifically to then spend those dollars buying diesel and by and large and and it's just going to get tougher for them in the next window. There is a silver lining, but there's no silver lining in a, it's all going to be OK in 10 minutes kind of way. Because economic systems don't change quickly, you know, they are, you know, embedded systems with technologies and institutions and things.

[00:40:57]And this process of demand destruction and energy system transformation is going to take time. The demand destruction piece, of course, is going to.

[00:41:08]Exact sum price. Some of it will be quite devastating socially, not only in the global S, but in parts of the global North as well. You know, and you touched on it before when you talked about the deindustrialization of certain parts of the old transatlantic economies. So demand destruction is going to be a an increasingly likely part of the system response that demand destruction in part is also what's necessary to then open up the the field for the transitions to other kinds of. Energy systems, some will be better placed to cope with that than others, and the ones who will be will be those who actually have good working relationships with China for the alternative technologies.

[00:42:03]Also I would say with countries like Russia, because Russia is one of two.

[00:42:09]Globally, global leaders in nuclear, Russia is also a significant supplier of hydrocarbon energies. So you know it can play continue to play an important role there and but over the next 10 years I think we are in for a very rocky period of fundamental. Energy system transformation coupled with of course ongoing and probably accelerated financial transition some, some countries and some sectors will I think without a doubt struggle and and then you can throw on top of all of that the, the kind of. Displaced, anxiety ridden reactions of the the old global N, you know, who are confronting a world that they no longer singularly dominate. And in that environment, how are they responding?

[00:43:04]Well, we're seeing some of their responses now. They're responding in often. A petulant ways, frequently violent, yeah. And and I think if I was just to put it nicely, I think ways in which are not only self defeating but also just grossly irresponsible and that's putting it very, very nicely.

[00:43:28]Yeah, no, that's the definitely. It's, it's, it's quite dangerous, but it also, I mean, you know, as the Chinese say, you know, it's a crisis, but also potential for shift. But I also think in from my vantage point is that we will see one paradigm shift from where I see I'm from Iraq. I have studied the West Asia, the Arab countries for many, many years. I might mention this was in the 1990s. I started looking at these things 199596. But it there is a, there will be a paradigm shift in the Gulf countries, in the whole Middle East, so-called and also oil exporting countries, but also we'll see a possible new architecture. And I mean, we discussed this discussed this before, but I would like to. Just give the outline of why I think there will be a paradigm shift. And a new security and economic architecture in this whole region. If we don't, if this war doesn't end and ends up in massive escalation and probably a nuclear war that's still open. I don't trust the Trump administration. I don't trust the Israelis. But if there is enough global pressure. Mediation, economic pressure, we might see a peaceful outcome, but that peaceful outcome will be devastating for the hegemonic power in the world. And I, I just because I presented this in China, I present this in recent meetings and I think people think it's interesting. It's just my viewpoint. If you allow me, I can just go through it quickly because it has very a lot to do with the oil and and gas situation. As I mentioned, um and did not from the 1970s, we have the Petro dollar and then we had the emergence of the rich Arabs, especially in the Gulf, Saudi Arabia specifically, but also. 28, Bahrain, Qatar. And there, there, there, there. There is a stereotypical idea about these countries. These are they have a lot of oil and gas production.

[00:45:34]They get a lot of money, but they have a very small population and they don't have industrial development. So where do they invest their money? They buy luxury goods, they travel. Then they invest most of the money in American, British banks, financial firms, real estate and so on and so forth, exactly as the people in Bilderberg said. And then that money is recycled globally by these Anglo American banks to put nations in debt trap and also use it as a leverage now. That stereotypical picture changed about 12 years ago, when the oil price in 2014 dipped to $30 per barrel. Now these countries need $80 per barrel to stay rich. Arabs. But from 2014 to 2020?Until recently the oil price was in average below 60, sometimes even at $40 per barrel.

[00:46:32]Already in 2014 the Saudis said we are going bankrupt, we need a new strategy, we need an and Mohammed bin Salman personally played a key role in this so-called Saudi Vision 2030 where he said now. We have to diversify, we need to industrialize, we need to use our financial resources but also our oil, not to sell as raw oil, but to industrial use, oil and gas as industrial materials, petrochemical industries, other industries, but also repatriate some of the money. We have in the West to invest in infrastructure and in industry and so on and so forth. So who was there to provide the technology?

[00:47:16]We had the Belt and Road emerging in that. 2015, 2016, all the nations of this region joined the Belt and Road I nitiative. I mean the West does not have the technology to offer. Anymore they have it, but they keep a monopoly over it. Even like oil refining, it's a monopoly. So all these nations not only joined the Belt and Road Initiative, but also starting to work closer with China. Also, many of these nations became observer members in the Shanghai Cooperation Organization was very, very important. You indicated to me earlier, because this is a security, Eurasian security structure, which is very, very important if you're going to have peace.

[00:47:58]So the old model was vanishing gradually with these nations trying to invest their oil money. They're all their oil and gas, physical oil and gas. In industrial development, but also their financial resources, the sovereign wealth funds of the Gulf countries have like $6 trillion.

[00:48:16]This is the money Trump wants to take, but they say no, we need that money for our own development, for our future generations. Also you have this stereotype which now has van is collapse.

[00:48:28]Is that part of the. Oil money is used to protect provide protection for those countries from Iran. You know why you don't know? By buying weapons from the United States and Britain, but also getting the military bases, military protection, which cost them a lot of money. This has proven to be completely useless. In this war, so this old model is vanishing and what happened is actually that. In December 2022 was a very important point, inflection point, not only because the Saudi American relationship completely was frozen with the Biden administration.

[00:49:07]There was a lot of tension. The killing of the Jamal Khashoggi, the so-called journalist who was not really a journalist, he was an agent. By the Saudis, there's a whole relationship was frozen and also that Saudi Arabia and the United Arab Emirates refused the Biden administrations instructions to break relations with Russia. Actually, they tightened the relationship with Russia through the OPEC Plus mechanism and they continue to have good relations with Russia. So by that, by the end of that year, 2022, President Xi Jinping visited the region, visited Saudi Arabia and he had three summits, one with Prince Salman and the kings, the King Salman and the Crown Prince, where they signed a comprehensive strategic cooperation agreement, the second day, a summit with all the GCC leaders, and the third day. Summit by cheating Xi Jinping with all the Arab leaders and in the summit with the GCC countries, President Xi Jinping presented that fantastic menu of cooperation Reed areas, not only buying oil in Chinese currency yuan, but also financial coordination using the financial resources of China and those countries. And real investments, building infrastructure, petrochemicals, nuclear power cooperation, space exploration cooperation, AI, cloud computing, all kinds of industries, electronics, EV, car production. And this thing started to actually be implemented immediately. It just two months.

[00:50:39]After that, President of Iran Raisi in February 2023, visited China and signed a similar agreement, a 25 year agreement for comprehensive strategic cooperation agreement, basically exchanging oil for technology, for infrastructure. And this was also a shift in the Iranian tendency.

[00:50:59]Because before that they were not so they didn't have a warm relationship with with China, but they also got incorporated in the Shanghai Cooperation Organization. They became full members, but also the countries and around in the Gulf, Turkey, Egypt also became.

[00:51:20]Observers in this in the Shanghai Cooperation Organization, so very, very important. Then in August 2023, the BRICS nations announced that they are inviting Saudi Arabia, Iran, Egypt, Ethiopia and the United Arab Emirates into the BRICS Plus and that was really shook things around. Uh, Saudi Arabia didn't join immediately because there was an enormous pressure because of the weight of, but all these other countries joined and then Indonesia was incorporated. So this whole region was moving completely into a different direction with their resources, with their, but also in that year, China managed to bring Saudi Arabia and Iran.

[00:52:00]Buy back on the diplomatic relations because the diplomatic relations were broken and proxy war between Iran and Saudi Arabia was waged in Yemen, Syria, Lebanon, Iraq, you know the Shia, Sunni but the Chinese managed to bridge the gap between Saudi Arabia and and Iran because the. Whole game has been since the 1980s to keep Iran and the Arab countries separate, divide and conquer. So in in that sense, you know, this whole region was moving into a completely new architecture and everybody's talking about the new security architecture. Then the Biden administration came up with this idea in.

[00:52:41]Late in September 2023, with the so-called India Middle East EU corridor, which is completely different than the Bri and the Belton Rd. is because it divides this region into countries who are friendly to Israel and the West and countries who are not friendly. The Chinese idea is that everybody is included. There are no exclusive clubs.

[00:53:03]And then actually Netanyahu, emboldened by this, in late September 2023, made his big speech in the UN, where he showed this map where there's green countries, there are friends of Israel, and there are these other countries who are enemies.

[00:53:21]Of Israel. And then even the year later he mentioned the India Middle East as the dividing line between the evil and the good guys and the Palestinian.

[00:53:32]In that map, Palestine no longer existed.

[00:53:35]So he had only a map of Israel. But there is no Palestine. There are no Palestinians. The whole Palestinian issue was erased. So one week after Benjamin Netanyahu's speech, Hamas attacked Israel to show that the Palestinians still exist. They are on the map. And then since then we had the massive brutality in Gaza, the genocide, and then the snowballing of conflicts into Yemen. Lebanon, Syria and finally now Iran. So this conflict between these two trajectories, I think this is really a lot of the conflict is about besides the shift in the global economic power and strategic power. But I believe if there is this. A peaceful solution to this conflict. All these nations will go back to that original architecture. When the Iranian foreign minister actually was in Moscow, they talked about this new security architecture in Beijing also in his meeting with the Wang Yi.

[00:54:44]Also, they both sides talked about a new architecture and I won't be surprised if Saudi Arabia and Iran become friends again, if there is a peaceful resolution and this whole region will move into a different situation. Of course, the Israelis and the Americans will never accept such a thing because that would mean the end of the old order so they might come up with new provocations, new problems to disturb that but it would be useful for the Israelis themselves to have a peaceful coexistence with this region. But unfortunately we have irrational people there so this is in my view is very, very crucial issue but also the. Oil and gas question is also central to this, because those nations don't want to just export oil and gas, they want to industrialize, they want to develop. And this will also mean the transition to other forms of energy will become crucial. So I don't know if this fits more into the picture of the. Right and and I think it has some broader implications too, because the the war that's been going on now you know this this round since the 28th of February, I think has ultimately shown a few things and probably the most important one of them is that American forward bases are not defendable so that.

[00:56:06]That's that's the protection money.

[00:56:08]That's no good problem. And secondly, that Iran has emerged as a regional power that can't be dislodged from having a seat at the regional table. The issue around the bases, though, will reverberate into other parts of the world because.

[00:56:26]The entire American global footprint over the course of the last 7580 years has been built on the back of having hundreds and hundreds of forward bases around the world, with American personnel and American installations in these places pointing at. Assorted adversaries and and anyone that the Americans don't like. Now that idea was that those bases would afford the host countries. And I'm using that in a very sort of guarded way because really they're not really sort of willing hosts in many regards, but you know, the the host. Countries, you know, the the quid pro quo was that they'd be protected. Clearly, clearly this entire setup is not only under stress, but I think demonstrably unviable. If these bases are within reach of drones should become a source of danger for you.

[00:57:23]If you have it, then they become a source of danger. Because yeah, right. So what went from being a security guarantee to being a liability I think raises questions of course, in Europe though I think the Europeans at the moment particularly, and I shouldn't use Europeans too broadly. I, I literally mean the sort of narrow political elite inside Brussels, whether it's the NATO elite or the EU. Elite they're currently doubling down on, you know their attitudes towards their their big neighbors to the east at but in Asia, you know where I am, it's going to have huge implications because the Asian security architecture for the last 50-60 years has been. Built on the basis of a network of American bases which has been in place to hold the so-called First Island chain together. Now the First Island chain, in my view, got breached probably about 10 years ago and was already back then unviable if not widely recognised. So I'd raise this issue probably about four or five. Years ago with colleagues, some of whom pushed back and said no, no, no, the Americans still, and this is Chinese colleagues as well as people outside of China, they still thought that the Americans were able to sustain the first island chain. And I said for a whole bunch of reasons, I thought that that was over. But I think clearly now that's over. But of course, all that means is. Uncertainty because how does this get resolved? And there are important lessons you know, from the timeline that you described in terms of the sort of economic. Networks that were being built. And this is similar to what has been happening in East Asia. So West Asia and East Asia has had very similar kinds of experiences, which is the, the, the growth of rail networks linking mainland China through and you know, eventually the plan would be to bring it all the way to say, Singapore. The development of cross-border electricity systems connecting Laos to, you know, to the mainland so that they can get more energy building of ports, et cetera, et cetera, et cetera. And of course, they're long river potential for hydropower, all that stuff, right. So, so, so in in some ways the East Asia. West Asia have had, you know, broadly speaking, sort of a common development path, which is to diversify, industrialize, modernize electricity systems and become ultimately more sovereign and, and, and I think that the unfolding of the American forward based position. In West Asia and the obvious conclusion that American bases are no longer a foundation of American force projection or hegemonic capabilities in in East Asia is going to force a very similar kind of discussion within the East Asian part of the world. I'm hoping that of course that discussion. Does not involve what's happened in West Asia, which is of course a kinetic war, but only time will tell.

[01:00:32]But yeah, you know, we we wrap back to the beginning of our conversation, which is really about.

[01:00:40]You know China's position in relation to Trump. You mentioned on Wang's meeting, there's a couple of things that I just read out which I think will be of interest to to the listeners. And this is about the comments made after the meeting between Arachi and Wang Yi in Beijing, for about 3 days ago and. Aragchi said this he amongst other things he says the Iranian side trusts the Chinese side and expects positive role in promoting peace and stopping war and this is the important bit and supports the establishment of a new post war regional architecture that can. That can coordinate development and security.

[01:01:27]The Chinese, then.

[01:01:30]Through their their regular foreign foreign ministry briefings, you know, so it's the spokesman, not not only himself, but the spokesman in response to a question about the the meetings with their archive said a whole bunch of stuff. But he ended up by saying China advocates that the Gulf and Middle East countries need to take their fate. Into their own hands. Let's just think about that, take their fate into their own hands, not have someone from outside the region, such as America, dictate terms. They must actually resolve the issues by themselves. He then goes on. We encourage Iran to have dialogue with more. Of states to realise good neighborliness and friendship. Right, reach out, go and speak to the others.

[01:02:19]No doubt Chinas encouraging them to be open to the discussion, right? Much like they did in 2022. So they're just trying to bring some life back to this.

[01:02:32]And the support of regional architecture for peace and security established by regional countries. With common participation, in other words, no one left out for common interests and common development. And I just thought I'd mention that because it reinforces your observations about the importance of the short lived, but nonetheless.

[01:02:59]Foundational and instructive progress that had been made in 21/22/23 to how The current conflict could in. Sense lean on some of that and clearly the Chinese are thinking that that is the basis upon which you can move forward again, but lean on that to say you're not working from a blank sheet of paper, lean on it to go forward. Now one of the interesting things and we touched on this prior to.

[01:03:32]The the sort of official recording and and this is that what the 2022-23 arrangements dealt with was the sort of economic foundations.

[01:03:43]That that clearly provoked A kinetic response in the end, right, Which means that on top of the economic foundations, there is now needing to be what is a narrower set of security architecture considerations to in a sense, bookend that and the SCO Shanghai Cooperation Agreement. Institutional framework I think does offer a way in which this can be done. The issue is going to be. How is the question of Palestine resolved? And because I never forget that going back to June last year, you know the first phase of the what was it 12, that 10 day war, 12 day war? Well, the June 12th day war the the issue.

[01:04:34]That was continually being raised actually both the Iranian side was that they were, that they were standing up to the Americans and the Israelis.

[01:04:44]Because of what they were doing in Palestine and what they were doing in Gaza.

[01:04:51]And so until the Gaza, Palestine and Israel question is brought to a head and resolved, there's going to be the risk that all of these other things will always have a stone in the shoe.

[01:05:10]And that's the thing now that I think everybody needs to be very, very mindful of because nobody wants a war to continue.

[01:05:21]Other than perhaps some, some, not all, but some people in Israel and some people in Washington, but I don't think that anybody else.

[01:05:36]I don't think you could muster an argument to say that the majority of anyone else in any of these other countries wants, you know, a long term water continue. No, that that's really, really puts the finger on the real issues of principles and rights and also peaceful coexistence among nations. But it should be based on justice. And doing the common good for everyone. I think this has been a very, very fantastic discussion. I'm looking forward to reading your book when it comes in the mail. And I really appreciate this discussions. Great, enriching. Thank you very much. Always a pleasure, Hassan.

[01:06:12]Great to talk to you. Thank you very much. Talk to you another time.