China is rapidly progressing to become the world's largest oil importer country. The U.S., which abolished the export ban on oil and natural gas produced in its own lands in 2013 and now has entered a period that would meet its needs from domestic sources, especially with its shale gas facilities, also strives to be a more ambitious exporter. While the U.S., which was importing 10 million barrels a day from the world in 2003, has shifted towards reducing its imports down to 4 million barrels a day by 2023, this time we observe that the economy that is moving toward imports of 12 million barrels a day is China's.
China was importing 9 million barrels of oil in 2018, but its imports are now at the level of 10 million barrels since the beginning of 2020. China; which is importing over $40 billion from Russia, $30 billion from Saudi Arabia, $25 billion from Angola, $23 billion from Iraq, $18 billion from Oman, $17 billion from Brazil and $15 billion from Iran; importing at the level of $144 billion from the top 15 countries where it is importing the most oil from in 2017, has carried this figure to $250 billion in 2019. During this period, it should be noted that it increased its imports from Libya by 250% and imports from the U.S. by 113%. Thus, the oil exports of the U.S. to China exceeded that of the United Arab Emirates (UAE).
Interestingly, with the Phase 1 trade agreement signed between the U.S. and China last week, the U.S., which was able to export $185 billion to China in 2017, will be putting another $76.7 billion on top of that in 2020, totaling $261.7 billion, and by adding another $123.3 billion to that in 2021, it will be reaching an export volume of $308.3 billion. Meanwhile, despite the 113% increase in 2018, the U.S., which was able to export $6.8 billion of oil to China thanks to the Phase 1 trade agreement, its exports of crude oil, petroleum products, liquefied natural gas, refined products and coal to China will increase by an estimated $18.5 billion in 2020 and $33.9 billion in 2021.
Hence, the U.S., increasing its energy exports to China to $50 billion in 2020, has moved to the No. 1 producer position with its daily oil production of 12.9 million barrels, above the production of Saudi Arabia's 12 million and Russia's 11.2 million barrels. Although the U.S. has reduced Iran's oil exports by 95% due to its heavy embargo on Iran, China still imports most of the remaining oil exports. For this reason, U.S. Treasury Secretary Steven Mnuchin stated that his country is committed to "resetting" China's oil imports from Iran and that all Chinese companies mediating the oil imports from Iran will be covered by the embargo.
All of these details point to this: the U.S. wants to close its foreign trade imbalance with China by making China import heavily, especially energy imports. Therefore, if Iran, which exports $15 billion to China; Venezuela, which exports $7 billion, and Libya, which exports $5 billion; are all disabled, China might have to meet this demand from the U.S. Should we be very surprised that Haftar forces in Libya closed the oil export ports of Brega, Ras Lanuf, Hariga, Zuveytine and Sidra, also referred to as the oil crescent zone, on Saturday? We should sit and think again on the future consequences of Turkey's Eastern Mediterranean move.
Target is real market economy
One of the most striking statements from Treasury and Finance Minister Berat Albayrak during the 2019 Evaluation Meeting last Monday with representatives of national media, financial sector economists, and economy columnists was his emphasis that the reforms, measures and steps to realize real market economy as an understandable concept will be accelerated. Similar to how the Turkish real sector is speeding up to quickly complete a restructuring focused on added value, efficiency, cost management and global competition in terms of its skills oriented towards production, employment and export; the Turkish banking sector needs to rapidly go through a similar "mental transformation."
Minister Albayrak pointed out that years of habits and business understanding in the Turkish banking sector have severely condemned the sector to a "plaza banking" approach. "Plaza banking" has almost detached a significant portion of the banks from the dynamics of the stunning transformation of the Turkish economy, the real sector's expectations in the field and the major changes observed in expectations and demands in the field in terms of access to financing. For this reason, financial actors in the banking sector should set aside "plaza banking" and rapidly complete the transition to real field banking, market banking and the mental transformation toward this point.
Since the 1994 crisis, focusing on the long bumpy period in the Turkish economy over the last 25 years, it is obvious that the Turkish real sector, whatever the circumstances, never loses its focus on investments, employment and exports, bringing the Turkish economy to a national income higher than $800 billion and to an export volume exceeding $180 billion. However, when it comes to the Turkish banking sector, except for a few banks that are the banks for hard days, we have seen dozens of times that a certain number of banks in the sector are very distant to this struggle in the field.
This is why for the "Economic Transformation" emphasized by Albayrak for the 2020-2022 period, as much as the responsibility is on the real sector towards a growth model focused on exports with high value-added and employment, to develop a real market economy model, it also places an important mission on the banking sector to leave an understanding of "plaza banking" and to do field and market banking and gives the responsibility to go through a mental transformation. Albayrak also reminds us that 2019 was not a successful year for the Turkish banking sector in this regard. This year should be a milestone year for a new banking approach that rapidly reflects every improvement in its economic balances to the real sector.
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