Russia emerges as a primary beneficiary of the military conflict between the US and Iran
Donald Trump has handed Vladimir Putin a genuine gift: the ignition of energy chaos. This "gift" extends beyond Russia to all oil-producing nations, yet most of them currently find themselves caught in the maelstrom of the Middle East war. This leaves Russian oil and natural gas as the dominant forces in the market. The conflict involving the US-Israel axis and Iran impacts more than just the immediate region; it reshapes the standing of superpowers like China, India, and Russia. US involvement in the Middle East risks weakening its strategic position in Asia by consuming military resources and munitions that would otherwise be reserved for a potential confrontation with China. Simultaneously, the crisis places India in a difficult diplomatic position, as it balances ties with both Iran and Israel, while a potential visit by Donald Trump to China amid this tension injects further uncertainty into international relations.
The balance of power shifts
Few doubt that the US-Israeli strikes on Iran (similar to previous actions regarding Venezuela) aimed to restructure foreign policy. At the heart of this shift are Russia, India, and China, for whom Iran remains a vital partner. While the war in the Middle East inflicts immediate economic pain on China and its partners, Beijing may benefit long-term as the US position in the Pacific—including its purely military standing—deteriorates. Economically, China relied on Iran for 13.5% of its oil, followed by a wide array of commodities such as methanol. Though a full damage assessment has yet to begin, stock prices across Asia are already dropping pre-emptively because oil and other essentials are guaranteed to become more expensive.
Munitions stockpiles
The primary concern in the region currently centers on the phrase "they don't have enough ammunition." While the United States possesses significant stockpiles, they may not be sufficient to "contain" China in Asia while simultaneously fighting a war in the Middle East. The Iranian situation reveals simple arithmetic: even a total US victory in the Middle East (which is far from certain) would weaken America in Asia. Arsenals are being depleted at a staggering rate and cost. If a more complex theater of war were to open in the Far East, observers wonder how many days it would take for the United States to run out of resources.
The Trump propaganda
Donald Trump has actively countered these concerns, claiming that ammunition is plentiful. However, military analysts cited by the Asia Times in Hong Kong are clear: current events are eroding US combat readiness against China. Furthermore, Chinese and Russian military aid to Iran is playing a critical role. This support doesn't necessarily guarantee an Iranian victory, but it enables prolonged resistance and ensures significant damage to the US-Israel duo, serving as a major strategic advantage for Iran’s partners.
Trump’s impending visit to China
While the long-term picture is still developing, the immediate question is how Donald Trump’s visit to China at the end of this month will proceed. Asian analysts have raised the rhetorical question of how such a visit is even possible under current conditions. However, Beijing prefers cold calculations over emotion. In a global military crisis, it is viewed as a sign of strength to negotiate with a potential adversary. Conversely, if Trump fails to extract concessions from China, it will be seen as a blow to US prestige, signaling that Washington is no longer strong enough to dictate terms.
The unexpected clash with the Spaniards
The recent episode where the American president rebuked the Spaniards for their reluctance to join the war with Iran—while claiming he has a "good relationship" with China—is telling. Following the visit, Trump will inevitably face accusations of weakness or "appeasement" toward Beijing. Consequently, if anyone cancels the trip, it is likely to be Trump himself. Leaks from planning circles suggest the American side is unsure what to expect, leading to a sense of unpredictability in the negotiations. Meanwhile, a high-level preparatory meeting between the US and China is being convened in Paris.
The case of India
The situation is becoming increasingly difficult for India, which has traditionally followed a policy of being "everyone's friend." For a time, this worked in the Middle East, where India was deeply involved in regional politics. Now, Indian businesses with ties to Iran are set to suffer. Furthermore, India’s rapidly growing military-technical ties with Israel have created a diplomatic awkwardness, particularly as Prime Minister Narendra Modi returned from Jerusalem just two days before the Israeli attack on Iran. This has led to sharp criticism from the domestic opposition.
India’s unique domestic factor
India faces internal pressures as well, housing 200 million Sunni Muslims and 25 million Shiites. There is a looming fear of increased hostility between Shiite Iran and the Sunni monarchies that host US military bases. As Tehran targets these bases, the region’s long-term "security" becomes a complex issue. India must navigate this landscape with extreme caution, as it will find it increasingly difficult to lead the initiative for a "new world order." Trump, meanwhile, continues to pivot, recently remarking to an European partner: "But at least I have good relations with India!"
The fatal price of oil is set
Russia stands as one of the primary winners in the US-Iran conflict. Attacks on crude oil, petroleum products, and LNG reserves in the Middle East have caused hydrocarbon prices to skyrocket. Oil prices have already surged past $84 per barrel, up from a February average of $64. Natural gas prices in Europe and Asia have nearly doubled; in Europe, the price at the TTF hub for April deliveries hit $727 per thousand cubic meters on March 3rd, up from under $400 just a week prior.
The importance of the Strait of Hormuz
The primary driver of these costs is the disruption of shipping through the Strait of Hormuz. Even without a formal Iranian blockade, shipping companies are avoiding the route due to the risk to tankers and crews. Insurance companies are refusing coverage, and tanker freight rates have doubled. Roughly 20% of global oil exports and 30% of LNG shipments pass through this narrow waterway toward China and other Asian markets. There are virtually no viable alternatives, and the ongoing attacks on oil and gas infrastructure make the situation even more precarious.
The attack on Qatar
An Iranian strike on Qatar's infrastructure has paralyzed the nation's gas production. As a supplier of 20% of the world's LNG, Qatar is vital to both European and Asian energy security. Even if the Strait of Hormuz remains open, there may soon be nothing left to transport. Repairing damaged energy infrastructure is far more costly and time-consuming than clearing a waterway. Furthermore, the closure of Saudi Arabia's largest refinery—capable of processing 550,000 barrels—has sent diesel prices on the ICE exchange up by 20%. For Russia, this crisis also allows the "Urals discount" to shrink, potentially moving from $30 below Brent to under $20.
Impact on revenues
The surge in export revenue for Russian oil companies and the national budget is significant. Experts estimate that every one-dollar increase in the price of oil generates an additional 150 billion rubles for the Russian budget. This "gift" is timely, given the recent budget deficit caused by previously low prices and a strong ruble. It allows Moscow to preserve the National Welfare Fund while earning more from diesel sales to Turkey and West Africa.
New... markets
New opportunities are opening for Russian LNG as well. Global price hikes mean Russian gas can be sold at a premium, and the loss of Qatari LNG may force the EU to be more lenient regarding sanctions on Russian gas. While Brussels intended to ban Russian LNG contracts starting in April 2025 and January 2027, the current shortage may force a policy reversal. Sanctioned projects like Arctic LNG 2 may also see increased demand from Asian buyers desperate for supply, regardless of the geopolitical cost.
Physical shortage
If the conflict crosses a certain threshold, the world will move from a "risk-based" price increase to a physical shortage of hydrocarbons. Prices will no longer rise based on speculation, but because there will be no oil or gas to run power plants, refineries, or industrial facilities. Even without a total closure of the Strait of Hormuz, the damage to Middle Eastern infrastructure could take years to repair. A physical shortage would eventually drive prices so high that purchasing fuel becomes unaffordable, leading to a collapse in demand and a subsequent economic crash. We saw this in 2020 with negative oil prices; while prices up to $120 per barrel can be profitable for producers, staying above that level for too long transforms a "windfall" into a global demand crisis.
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