The Outsider Perspective Issue 482

Gas lines are back. Not in the America, but in China.

This week, consumers across southern China lined up at fuel stations as the Strait of Hormuz crisis choked supply lines. In Guangdong and Fujian, drivers queued for hours. In Hong Kong, residents drove across the border into Shenzhen to fill up before prices climbed higher. On March 11, Beijing made it official: the government banned all refined fuel exports, ordering refiners to cancel existing contracts and stop signing new ones.

This isn’t a gas shortage story. It’s a government in crisis-management mode. China holds strategic and commercial petroleum reserves measured in weeks to months of import coverage — enough to buy time. Not enough to buy a solution.

In eighteen days, Xi Jinping sits across from Donald Trump in Beijing. America has the leverage. The question is what Trump decides to do with his new leverage.

The hand Xi lost

Last week I argued that America had chosen ascendance and that the oil spike wasn’t collateral damage — it was the strategy. The last week confirmed the thesis and raised the stakes.

When China agreed to this summit, it held a strong hand. And one of those cards actually hit: the Supreme Court struck down Trump’s IEEPA tariffs 6-3 on February 20. All tariffs terminated. A genuine legal victory for Beijing — the kind of result that should have strengthened Xi’s hand.

It didn’t matter. Trump pivoted to Section 301, launching a new trade investigation on March 11 targeting sixteen trading partners, with China at the top of the list. The president lost the legal argument and found another weapon before the ink dried.

Meanwhile, the rest of Xi’s hand collapsed. Hormuz is effectively closed — tanker traffic down 70% according to Kpler ship-tracking data, seven vessels attacked in a single 24-hour period, Iran laying sea mines in the waterway. Trump captured Venezuela in January. Iran’s 1.5 million barrels per day of discounted crude to Chinese refineries vanished. The cheap energy that underwrote China’s manufacturing advantage is gone.

Bloomberg reports that Beijing is frustrated by thin American preparation for the summit. Deliverables have narrowed to commercial purchases — soybeans, aircraft. But the frustration isn’t really about logistics. It’s about the ground shifting beneath Xi’s feet.

The escort that says everything

Trump offered to escort tankers through Hormuz — including Chinese-flagged vessels. Treasury Secretary Bessent is forming a global coalition for the mission. Energy Secretary Wright acknowledged on March 12 that the Navy isn’t ready to begin yet. But the offer itself is the tell.

America can project force in the Persian Gulf. China cannot. Beijing has a naval base in Djibouti and runs anti-piracy patrols, but it lacks the permanent basing and logistics chain for sustained combat operations six thousand miles from home. There is a meaningful difference between a naval exercise and a naval capability. The Iran war just made that difference visible.

And the images from the strait tell their own story. According to the Financial Times, at least ten vessels near Hormuz have started broadcasting themselves as “Chinese-owned” in their transponder data to avoid Iranian attack — even though most fly Panamanian or Marshall Islands flags. Iran generally avoids targeting ships linked to China. So foreign-flagged tankers are hiding behind China’s name for protection while China itself needs American escorts to get its oil home.

That is the asymmetry Xi carries to the summit table. China needs Hormuz open. Only America can open it. In terms of realpolitik, this is a real power versus a paper tiger.

The alliance that needs itself too much

The easy read on the Iran war is that high oil prices help Russia and hurt China, splitting the DragonBear alliance apart. It’s more tangled than that. And it matters for what happens in Beijing.

Russia isn’t gouging China on price. It’s actually deepening its discount — competing with Iran for the same narrow pool of Chinese buyers, mostly independent “teapot” refiners that process sanctioned crude outside state-controlled channels. Russian Urals crude is trading roughly twelve dollars below Brent. Iranian crude, where it’s still moving, undercuts even that.

Russia is winning on global revenue — the Centre for Research on Energy and Clean Air estimates roughly €510 million per day in fossil fuel income since the war began, a 14% jump from February’s baseline. That windfall is financing the Ukraine war.

But Russia is achieving it by locking itself into structural dependence on a single major customer that demands ever-steeper discounts as the price of continued business. Moscow gets rich globally while losing leverage with China. China, meanwhile, has lost 17-18% of its oil import mix with Iran and Venezuela offline and is increasingly reliant on Russian barrels it can’t afford to lose.

Both sides need each other more than they’ll admit — a dependency trap, not a fracture — and the Iran war is tightening the screws on both at once.

Then there’s the quiet American move. Washington gave India a 30-day waiver to buy Russian crude already loaded on tankers. Indian refiners scooped up 30 million barrels almost overnight. Whether deliberate or incidental, the effect is the same: it gives Moscow an alternative customer and compresses China’s leverage over Russia at exactly the moment Beijing needs it most.

Iran floated Russia as a guarantor of any ceasefire deal. Russia’s response has been to collect windfall revenue while its “partner” absorbs American strikes. That is portfolio management, not an alliance.

Iran isn’t folding

But leverage on paper isn’t leverage at the table.

Iran is not cooperating with the American timeline. The new Supreme Leader — assuming he’s actually running things, which is genuinely unclear — hasn’t made this any easier. Mojtaba Khamenei hasn’t appeared publicly since his appointment on March 8. No face on camera. No voice on tape. Only written statements read by state television anchors. CNN reports a fractured foot and facial lacerations from the strike that killed his father. Iranian opposition groups claim he’s in a coma. Iranian officials insist he’s “safe and sound.” Nobody outside Tehran actually knows.

There’s a real possibility the regime is being steered by committee while projecting the image of singular authority — which means every public statement from Tehran may be more performance than policy.

Someone in that regime is making decisions, and whoever it is has vowed to keep Hormuz closed and attack American bases in the region. Iran is demanding reparations, firm guarantees against future strikes, and full American withdrawal from the Middle East — all as conditions for even talking. Washington won’t accept any of them. The WSJ editorial board put it directly this week: winning now includes reopening the Strait of Hormuz. But the Navy isn’t ready.

Goldman Sachs extended its disruption forecast from 10 to 21 days. Macquarie says crude could top $150 if the strait stays closed for weeks. The IEA’s 400 million barrel reserve release — the largest in history — covers less than a month of the roughly 20 million barrels per day that normally transit Hormuz.

And the domestic pain is arriving. Gas prices hit $3.50 nationally, up 21% in a month. Fertilizer prices jumped 30% in a single week, right as American farmers are making spring planting decisions. Analysts project 1 to 1.5 million acres will shift from corn to soybeans this spring because soybeans require less fertilizer.

Goldman raised U.S. recession odds to 25%. Wall Street strategist Ed Yardeni pegs stagflation risk at 35%. This is the TACO risk in real time — “Trump Always Chickens Out,” the trader shorthand for the pattern where Trump reverses course under sustained market pressure. Iran is betting he blinks. Polymarket odds of the war ending by month’s end have dropped from 43% to 20%. Tehran is playing for time, and the clock runs through the summit.

The ask

Bessent is set to meet Chinese Vice Premier He Lifeng in Paris this weekend to finalize summit parameters, with U.S. Trade Representative Jamieson Greer also at the table. The American ask is now in the open: reduce oil purchases from Russia and Iran. Switch to American energy supplies — LNG, crude, and agricultural commodities. In return, Washington would offer clarity on technology export restrictions and potentially slow the Section 301 trajectory.

China has explicitly rejected the oil demand. Beijing insists it will secure energy supplies based on national interests, not American pressure.

Any deal probably looks like this: commercial purchase commitments on the easy items — soybeans, Boeing aircraft — a framework on rare earth exports, and deliberate ambiguity on the oil question, with both sides claiming progress and neither committing to specifics. The Section 301 investigation provides Trump with ongoing leverage beyond the summit itself.

If the summit produces nothing, both sides lose — but China loses more in the short term. The Hormuz squeeze continues, Section 301 pressure escalates, and the domestic political pressure on Xi intensifies. For Trump, a failed summit means $100-plus oil heading into midterms with no relief valve. Both sides have reasons to walk away with something. The question is whether either can accept what the other is offering.

The levers no one else pulled

I’m not trying to make Trump sound like he’s playing five dimensional chess here. The argument is more fundamental.

The United States has always had this level of power, or versions of it. The navy. The energy production. The corridor control. The alliance network. None of these are new. What changed is the willingness to use them. Obama chose retreat — leading from behind, “strategic patience,” and red lines drawn in disappearing ink. As I wrote last week, that was a choice, not a constraint. Biden chose hesitation — a chaotic Afghanistan withdrawal, slow-walked Ukraine aid, an Iran policy that amounted to hoping the regime would negotiate itself into irrelevance. Both administrations left key levers of American power untouched, or worse, loosened restrictions. And China and Russia built an entire strategic doctrine on the assumption that those levers would never be pulled.

Trump is pulling them. Venezuela. Panama. Iran. Section 301. Tanker escorts. Not all of it is elegant. Some of it carries real risk — the domestic pain is genuine, and the Strait of Hormuz remains closed as of this writing. But the net effect is unmistakable: the United States has seized a sizable advantage and tilted the global field against both China and Russia at once. That’s what successful leverage produces — not the absence of risk, but a buildup of options your opponent doesn’t have.

In eighteen days, Trump and Xi sit down in Beijing. Only one of them will be there because he chose to be. The other will be there because he has no choice.