Although it is well known that coal will have to be phased out eventually if countries are going to meet their climate targets, it still carries an important weight to the economy during the transition if they are to be able to move over to more clean sources of energy.
This is particularly important in countries such as Australia, where a reliance on coal over the last few decades has allowed it to build up its resources and finances but has left it in a position where it has not yet been prepared to make the leap to less carbon-intensive sources.
So when the Chinese port of Dalian put a moratorium on importing Australian coal back in February, it came as a bit of a shock. The Australian dollar struggled somewhat, with what was originally thought to be just a delay on clearing customs being part of something much wider.
According to Australian media, there appears to have been an official stance put out by the Chinese state, calling on all government-backed power plants and manufacturers to stop using Australian coal in all instances.
With China being one of the main trade routes for the nation, this poses a problem in line with some of the tariff measures they have imposed in the last year. Australia has struggled to shift many products along their normal trade routes, partly because of the ongoing trade war between the U.S. and China, where both countries slapped tariffs on certain resources.
It seems as if Indonesia is going to be the main beneficiary in this case, with the state made up of over 17,000 islands in the middle of its own electoral upheaval, but it would appear changing politicians is not the main driver behind the move.
It had been thought in many circles that uncertainty from the Australian elections coming in May might well have contributed to China's decision, but their intent to switch straight to Indonesia to source coal would suggest otherwise.
Dr Binoy Kampmark, a senior lecturer at the RMIT School of Global Studies, described this as a "subtle punishment", likening it to "a slap", and said this was part of China’s motive to "let others know where they stand."
With such a large capital investment vehicle behind the Chinese state, they appear to have enough power to destabilize an entire industry in a country if they choose to do their business elsewhere, and with this happening on the eve of an election, it could pose a problem for Scott Morrison’s administration.
The recent spat over Huawei is not thought to have helped matters, and is an indication that China are prepared to walk away from working trade routes if it causes them problems elsewhere. Huawei have been banned from building new 5G cables in many Western countries after concerns were raised by internal security forces in the likes of the U.S. It led to China backing one of the biggest companies in the world at the risk of damaging bilateral relations, which is what appears to have happened to Australia.
Kampmark described it as a "symbolic impact" more than anything and a reminder that when Australia sides with the U.S. first as an ally, it can have a negative effect on their relationship with China. Quite what the Morrison response is to this remains to be seen, and where he can use it to drum up voter support or otherwise.
Source: Oliver King/theBull.com.au
16 April 2019