China Courts the Middle East

By Dilip Hiro

As a country importing 11 percent of its oil from Iran, the latest American and European move to isolate Iran has put China in a quandary. Should it join the West with which it has close economic ties, or ignore the call for sanctions on Iran, not backed by the United Nations, to maintain its energy security? With the recent visit of Chinese Prime Minister Wen Jiabao to three oil-rich Gulf monarchies, Beijing's deft diplomacy has sidestepped the issue.

Wen highlighted main principles of Beijing's foreign policy: non-interference in other countries' affairs; prioritizing energy security by ensuring steadily increasing supplies of oil and gas; and expanding trade. This set of guidelines has proved adequate, so far, to enable China to navigate the turbulent Middle East.

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Wen described China's oil trade with Iran as "normal trade activity" at the 18 January press conference in Doha. "Legitimate trade should be protected, otherwise the world economic order would fall into turmoil."

He spoke against the background of US Treasury Secretary Timothy Geithner's Beijing visit to persuade Chinese leaders to "wean themselves off Iranian oil" and Washington's imposition of sanctions on Zhuhai Zhenrong Company, a state-owned Chinese oil corporation.

The United States alleged that Zhuhai Zhenrong had violated US sanctions by brokering delivery of gasoline, worth $500 million, to Iran from July 2010 to January 2011. It barred Zhuhai Zhenrong from receiving US export licenses, US Export Import Bank financing or loans over $10 million from US financial institutions. The restrictions are largely symbolic because, according to the company's spokesperson, "We have never had any business cooperation with any United States companies."

Liu Weimin, the foreign ministry's spokesman, said that "China's regular demand for energy does not have anything to do with the Iranian nuclear issue and should not be affected. To place one country's domestic law above international law and press others to obey is not reasonable."

China's stance stands in contrast to what the White House aims to achieve. Following Geithner's meetings in Beijing, a US official explained that the Obama administration was "in the early stages of a broad global diplomatic effort to take advantage of this new legislation to significantly intensify the pressure on Iran" regarding its nuclear program. He was referring to the Defense Authorization Act, signed into law on 31 December, which includes targeting foreign financial institutions doing business with Iran's central bank, notably to buy petroleum.

Referring to the Geithner mission, the Global Times - a tabloid owned by the People's Daily, official organ of the Chinese Communist Party - described it as another sign of America's "Big Power mindset," to be ignored.

Beijing is the largest buyer of Iranian petroleum, accounting for 20 percent of Iran's exports - the same as all 27 members of the European Union combined. China's thirst for petroleum is rising so fast that, according to Goldman Sachs, it will become the globe's largest importer of oil by mid-2013.

Iran became an early supplier of oil to China once the Beijing government decided to import it in 1993. A decade later China National Petroleum Corporation (CNPC) and Sinopec became involved in developing Iran's hydrocarbon resources.

In November 2004, while Washington tried to get Iran's nuclear file referred to the UN Security Council, Sinopec and National Iranian Oil Company (NIOC) and Iran LNG signed memorandums of understanding for the development of the Yadavaran oilfield, containing 3.2 billion barrels of oil and 2.7 trillion cubic feet of gas - the biggest hydrocarbon deal so far by any member of the Organization of Petroleum Exporting Countries.

In March 2008, while the Security Council imposed a third set of sanctions on Tehran, pertaining to nuclear and missile programs, China and Iran struck a three-year $3.39 billion deal to produce liquefied natural gas, LNG, in Iran's mammoth South Pars field. Another deal with CNPC followed in January 2009. Later that year, the Chinese companies inked $8 billion worth of contracts with Iran to help expand two Iranian oil refineries.

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Dilip Hiro is the author of "After the Empire: The Birth of a Multipolar World" (Nation Books, New York and London). Click here to read an excerpt. His forthcoming book is "Apocalyptic Realm: Jihadists in South Asia," to be published by Yale University Press in April.

Copyright © 2012 Yale Center for the Study of Globalization

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