Can A Grand Bargain With China End The Iran War?
The Beginning Of The End Of The War
There are a few different views now on how the current war with Iran can end, ranging from Trump's trial balloon yesterday of walking away without securing the Strait of Hormuz, to predictions of a limited ground operation. Below we share another prediction of how it might end: a grand bargain with China.
One thing most of the the predictions have in common is the war ending sooner rather than later.
That's been our view as well, which is why we've been selectively adding bullish exposure throughout the conflict. We have three bullish trades teed up for today on AI names we like after a pullback, including one most of you have probably never heard of.
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And if you think we're wrong about the war winding down, and you want to hedge against it getting worse, you can use our website or iPhone app to scan for the optimal hedges for that.
But here's an idea of how the war could end with a grand bargain with China.
Authored by Shanaka Anselm Perera on X
A Grand Bargain With China
JUST IN: The United States has fired 2,400 Patriot interceptors in 31 days. It manufactures 650 per year. Replenishment at current production takes three and a half years. It has consumed 40 percent of its global THAAD inventory. It produces fewer than 100 THAAD interceptors annually. Full replenishment takes four to five years. Each interceptor contains neodymium and samarium-cobalt magnets sourced from Chinese-controlled supply chains. The US defence rare earth stockpile has approximately two months remaining.
Read those numbers again. The US military has consumed more precision weapons in one month than it can manufacture in three years, using materials it can only source from the country it may need to fight next.
Every Patriot fired at an Iranian Fattah-2 over Riyadh is a Patriot that does not exist for a Chinese DF-21 over the Taiwan Strait. Every rare earth magnet consumed in Gulf interceptors is a magnet that cannot be installed in a replacement built for the Pacific. The Iran war is not just depleting American arsenals. It is depleting American deterrence against China. And the country counting the interceptors from both sides of the table, as supplier and as future adversary, is the same country hosting peace talks in Beijing right now.
China controls 90 percent of rare earth refining. China produces 90 percent of the world’s high-performance magnets. China buys 80 to 91 percent of Iran’s oil exports. China provides BeiDou navigation and ammonium perchlorate propellant to the Iranian missiles that are forcing the US to burn through its interceptor stockpile. China is simultaneously the supplier of the weapons America is using, the supplier of the weapons Iran is using, the primary customer of the oil the war is disrupting, and the only country with the leverage to end the disruption.
The arithmetic of the grand bargain is not complicated. The US needs Chinese rare earths to rebuild its interceptor inventory. China needs Hormuz open to receive Iranian oil. The US needs the war to end before its stockpiles hit zero. China needs tariff relief, semiconductor export control rollbacks, and Taiwan arms-sale restraint. Both sides need something only the other can provide. The question is not whether a deal happens. The question is how much of America’s strategic position in the Pacific gets traded for the minerals needed to survive the Gulf.
RAND estimated that 78 percent of US defence contractors would face production shutdowns within 90 days of a Chinese rare earth cutoff. The 2027 deadline to ban Chinese-sourced magnets from Pentagon procurement is nine months away with no domestic alternative at scale. MP Materials operates the only US rare earth mine and ships its concentrate to China for processing. The mine-to-magnet supply chain that the Pentagon needs to survive a Taiwan contingency runs through the country the Taiwan contingency is designed to deter.
This is not a supply chain problem. This is a civilisational dependency. The United States built the most advanced military in human history on materials processed by its principal strategic competitor. It is now fighting a war that burns through those materials at a rate that makes replenishment impossible without the competitor’s cooperation. And the competitor is sitting in a conference room in Beijing today, across the table from Pakistan’s foreign minister, calculating exactly how much of America’s future it can extract in exchange for the minerals America needs to have a future at all.
The deal of the century is not a choice. It is arithmetic. And the arithmetic leads to Beijing.