June 14, 2026: In late May Chinese leaders travelled to the Zhoushan National Oil Reserve and discovered the nation’s strategic oil reserves weren’t there. For over a year, the disruption of oil supplies from Venezuela and Iran had left Chinese oil reserves reduced. Despite that, government documents indicated that China still had 1.2 billion tons of oil reserves. That’s equivalent to 8,756,117,022 barrels.

China’s strategic oil reserve, to the surprise of the government officials who went to verify the reserves in May, was instead composed of water, sludge, various debris and overflow from nearby sewer lines.

Because the Americans dominated global energy supplies, the Chinese oil reserve served as a major cushion to any disruptions to Chinese oil imports from the Persian Gulf, especially Iran whose main customer was China. Under America's global energy stranglehold, Chinese crude oil stockpiles have reached the verge of collapse at the slightest exposure.

The current Chinese vulnerability stems from the American disruption of Venezuelan oil exports to China and more recently a similar situation with Iranian oil exports to China.

China’s strategic oil reserve was insurance against disruptions in Venezuelan and Iranian imports. With its oil reserves revealed as a sham, China finds itself in a desperate situation. What happened to Chinese oil? It was soon discovered that corrupt government officials and oil reserve personnel had sold the oil and pocketed the proceeds. The local buyers were often operators of small, locally owned refineries that turned the oil into commercial products that were sold throughout China. Most of these oil criminals then fled, often leaving China for sanctuary states that would welcome any affluent Chinese and their new wealth. The only winners were a few conniving Chinese and the Americans, who continued to dominate the global energy system.

In China corruption is not just an economic issue. For thousands of years there was corruption in the military as well. China has had a corruption problem in its military for a long time. Think thousands of years. One reason the communists won the civil war against the Nationalists in the 1940s was because the Nationalists were much more corrupt. For about a generation, the communists kept corruption under control. But for the last four decades, corruption has been a growing problem. This despite several major efforts to stop it.

The theft of China’s strategic oil reserves is only the latest of several recent awful discoveries of massive corruption impeding the ambition of its leader, President Xi, to conquer Taiwan. The last one concerned military corruption in building equipment to invade Taiwan, and was discovered in 2023. Missile fuel tanks were found to be filled with water, missile silo lids could not be opened, and the protective concrete missile silos themselves were so defective they might as well have been made of wood. The air force and navy lacked sufficient spare parts for even a week of operations against Taiwan and many aircraft and naval vessels were outright inoperable. This postponed the earliest possible date for the invasion of Taiwan from 2025 to 2027.

The non-existence of China’s strategic oil reserve will probably have the same effect. The on-going closure of the Strait of Hormuz due to the war with Iran means China cannot begin to refill its oil reserve until several months after that war ends, due to the need to clear the Strait of anti-ship mines. Then it will take at least another 18 months for China to rebuild, at exorbitant expense to its hard currency reserves, the 1.2 billion ton oil reserve it thought it had. China’s natural gas reserves, to the extent those were believed to exist, were quite inadequate to its needs in the event of a US blockade in a war with Taiwan. Closure of the Strait of Hormuz has made that clear. It will take still longer and cost more to build a strategic natural gas reserve.

There are at least major possibilities that a Chinese invasion of Taiwan has been postponed for another two years, to 2029, and perhaps indefinitely due to further discoveries of calamitous-scale corruption.

So now the Chinese are really getting serious. They are installing cost control systems, with regular audits, to monitor their military spending. In the past, budgeting was pretty primitive, mainly because cost accounting was expensive to implement. In the past, detailed spending data was collected after the fact, if at all. This made it easier for corrupt officers to steal. Noting how effectively Western, Japanese and Taiwanese companies dealt with corruption using detailed budgets and frequent audits, China installed similar systems throughout its armed forces. This caused some morale problems among senior officers, but this was not believed to be serious. Meanwhile, the program cut costs an average of ten percent in units where it had been installed.