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The ties that bind China, Russia
and Iran
By Jephraim P Gundzik
The
military implementation of the George W Bush
administration's unilateralist foreign policy is
creating monumental changes in the world's
geostrategic alliances. The most significant of
these changes is the formation of a new triangle
comprised of China, Iran and Russia.
Growing ties between Moscow and Beijing in
the past 18 months is an important geopolitical
event that has gone practically unnoticed. China's
premier, Wen Jiabao, visited Russia in September
2004. In October 2004, President Vladimir Putin
visited China. During the October meeting, both
China and Russia declared that Sino-Russian
relations had reached "unparalleled heights". In
addition to settling long-standing border issues,
Moscow and Beijing agreed to hold joint military
exercises in 2005. This marks the first
large-scale military exercises between Russia and
China since 1958.
The joint
military exercises complement a rapidly growing arms
trade between Moscow and Beijing. China is
Russia's largest buyer of military equipment. In
2004, China was reported to have signed deals worth more
than $2 billion for Russian arms. These included naval
ships and submarines, missile systems and
aircraft. According to the head of Russia's armed
forces, Anatoliy Kvashnin, "our defense industrial
complex is working for this country [China],
supplying the latest models of arms and military
equipment, which the Russian army does not have".
Russia's relations with China are not limited to
military trade. In the past five years,
non-military trade between Russia and China has
increased at an average annual rate of nearly 20%.
Moscow and Beijing have targeted non-military
trade to reach $60 billion by 2010, from $20
billion in 2004. One of the key components of
commercial trade is Russian energy exports to
China.
In early 2005, Moscow agreed to
more than double electricity exports to China, to
800 million kilowatt hours (kWh), by 2006.
Officials at Russia's electricity monopoly,
Unified Energy Systems, are also courting Chinese
investment in the development and renovation of
Russia's electricity system. In October 2004, the
China National Petroleum Corporation (CNPC) and
Russia's Gazprom signed a series of agreements
intended to study how Russia can best supply
natural gas to China. At the same time, Russia
signed specific agreements with China on oil
exports.
Russia's oil shipments to China
are slated to reach 10 million tons in 2005,
increasing to 15 million tons in 2006. All of
these shipments will be made by rail. However,
this agreement was overshadowed by talks
concerning the construction of an oil pipeline
from Siberia to northern China. Russia has been
pondering an oil pipeline to China for nearly 10
years. In 2002, plans for this pipeline received a
boost when Moscow pledged to invest $2 billion in
an oil pipeline running from the Siberian city of
Angarsk to Daqing in northeastern China.
At the end of 2004, Russian officials
announced that rather than running into China, the
new mega pipeline would terminate in Russia's
Pacific port of Nakhodka. Japan lobbied Moscow
hard for this configuration, offering to finance
the entire construction project, the cost of which
is estimated to exceed $10 billion. In addition to
a readily available financing source, the Nakhodka
pipeline will remain entirely in Russian
territory, allowing Moscow complete control over
the oil flow.
Many analysts viewed
Moscow's decision as a blow to relations with
China. Though the pipeline does not terminate in
China, it does pass within 40 miles of Russia's
border with China. A spur from this pipeline to
China would be inexpensive, while further
diversifying the market for annual oil flows
expected to reach 80 million tons. In other words,
why should either Moscow or Beijing finance an
eastern oil pipeline when Tokyo is bending over
backwards to provide such financing?
More
indicative of Russia's deepening energy relations
with China are the circumstances surrounding the
renationalization of Russian oil major Yukos.
Yukos was the only Russian company exporting oil
to China. Russia's government effectively
renationalized Yukos in late 2004 when it seized
the company's primary production unit,
Yuganskneftegaz, and auctioned it off to the
highest bidder. Yuganskneftegaz, located in
Siberia, is Russia's second-largest oil producer.
Through somewhat twisted means, Russia's
state-owned oil company, Rosneft, acquired
Yuganskneftegaz for $9.3 billion. In December
2004, Russia's Industry and Energy Minister Viktor
Khristenko offered the CNPC a 20% stake in
Yuganskneftegaz. In February 2005, Russian Finance
Minister Alexei Kudrin revealed that Chinese banks
provided $6 billion in financing for Rosneft's
acquisition of Yuganskneftegaz. This financing was
secured by long-term oil delivery contracts
between Rosneft and the CNPC.
It is
unclear whether the CNPC owns a portion of
Yuganskneftegaz. However, in March, Russian
authorities approved a merger between state-owned
gas company Gazprom and Rosneft. This merger
excludes Yuganskneftegaz, which will remain a
separate state-owned company. It is possible that
Yuganskneftegaz was left a stand-alone unit to
facilitate China's investment in the company.
China's involvement in the
renationalization of Yukos represents the most
significant foreign participation in Russia's
highly guarded oil sector. The CNPC is also
involved in several joint ventures with Russia's
state-owned gas company, Gazprom. These include
ventures to develop energy reserves in Iran, the
home of China's largest energy-related
investments.
Beijing and Moscow warm to
Tehran.
In March 2004, China's state-owned
oil trading company, Zhuhai Zhenrong Corporation,
signed a 25-year deal to import 110 million tons
of liquefied natural gas (LNG) from Iran. This was
followed by a much larger deal between another of
China's state-owned oil companies, Sinopec, and
Iran, signed in October 2004. This deal, worth
about $100 billion, allows China to import a
further 250 million tons of LNG from Iran's
Yadavaran oilfield over a 25-year period. In
addition to LNG, the Yadavaran deal provides China
with 150,000 barrels per day of crude oil over the
same period.
This huge deal also enlists
substantial Chinese investment in Iranian energy
exploration, drilling and production as well as in
petrochemical and natural gas infrastructure.
Total Chinese investment targeted toward Iran's
energy sector could exceed a further $100 billion
over 25 years. At the end of 2004, China became
Iran's top oil export market. Apart from the oil
and natural gas delivery contracts, the massive
investment being undertaken by China's state-owned
oil companies in Iran's energy sector contravenes
the US Iran-Libya Sanctions Act. This law
penalizes foreign companies for investing more
than $20 million in either Libya or Iran.
Side-stepping US laws is nothing new for
China. Beijing, as well as Moscow, has supplied
Tehran with advanced missiles and missile
technology since the mid-1980s. In addition to
anti-ship missiles like the Silkworm, China has
sold Iran surface-to-surface cruise missiles and,
along with Russia, assisted in the development of
Iran's long-range ballistic missiles. This
assistance included the development of Iran's
Shihab-3 and Shihab-4 missiles, with a range of
about 2,000 kilometers. Iran is also reportedly
developing missiles with ranges approaching 3,000
kilometers.
In late 2004,
former secretary of state Colin Powell asserted that
Iran was working to adapt its long-range
ballistic missiles to carry nuclear warheads. China was
also believed to be producing several new types
of guided anti-ship missiles for Iran in 2004.
China's and Russia's sales of missiles and
missile technology as well as missile
development assistance contravenes the US-Irannon-proliferation act of
2000. This act specifically states that sanctions
will be "imposed on countries whose companies
provide assistance to Iran in its efforts to
acquire weapons of mass destruction and missile
delivery systems".
In the past several
years a number of Chinese and Russian companies
have faced US sanctions for selling missiles and
missile technology to Iran. Rather than slowing or
stopping such sales, the pace of missile
acquisition and development in Iran has
accelerated. Like relations between China and
Russia and China and Iran, Russia's relations with
Iran have also advanced considerably in the past
18 months. In addition to increased investment in
Iran by Russia and burgeoning arms trade between
the two countries, Russia has been heavily
involved in Iran's nascent nuclear energy
industry.
After much wrangling and
repeated US intervention, Russia and Iran finally
signed, in February, a deal clearing the way for
the shipment of Russian nuclear fuel to Iran's
nuclear power plant at Bushehr. Washington's
primary concern about Bushehr is the intended use
of the plant's spent nuclear fuel. This fuel can
be discarded, reprocessed, or used in the
manufacture of weapons-grade plutonium. In an
effort to assure Washington that the last of these
three possibilities will not come to pass, Moscow
has promised that all the spent fuel from Bushehr
will be returned to Russia.
Nonetheless,
Washington continues to believe that Bushehr's
start-up will advance Tehran's supposed nuclear
weapons program. Though evidence of an Iranian
weapons program is sparse, the US remains
convinced that Iran is working to develop nuclear
weapons with Russian assistance.
The
new geostrategic alliance
Along with
energy trade, investment and economic development,
the China-Iran-Russia alliance has cultivated
compatible foreign policies. China, Iran and
Russia have identical foreign policy positions
regarding Taiwan and Chechnya. China and Iran
fully support the Putin government's war against
the Chechen separatists (Iran's self-described
status as an "Islamic republic" notwithstanding).
Russia and Iran support Beijing's one-China
policy. The recent promulgation of China's
anti-secession law, aimed at making Beijing's
intolerance of Taiwanese independence explicit,
was heartily commended in both Moscow and Tehran.
The most compelling aspect
of this alliance is revealed in China's
and Russia's support for Iran's much-maligned
nuclear energy program. The Putin government
has consistently maintained that Russia would not
support UN Security Council resolutions that
condemn Iran's nuclear energy program or apply
economic sanctions against Iran. In February, Putin said
he was convinced Iran was not seeking to
develop nuclear weapons and announced plans to visit
the country, in support of Tehran, just prior to
his summit with President Bush.
Beijing has
echoed Moscow's opposition to UN action against
Iran. After concluding the historic gas and oil
deal between China and Iran in October 2004,
China's Foreign Minister Li Zhaoxing announced
that China would not support UN Security Council
action against Iran's nuclear energy program.
Opposition in Moscow and Beijing to UN action
against Iran is significant because both countries
hold UN Security Council veto power.
The endorsement of Tehran's nuclear energy program
by Moscow and Beijing reveals the primary
impetus behind the China-Iran-Russia axis - to counter US
unilateralism and global hegemonic intentions. For
Beijing and Moscow, this means minimizing US
influence in Asia, Central Asia and the Middle
East. For the regime in Tehran, keeping the US at
bay is a matter of survival.
The joint
statement issued at the conclusion of Putin's
state visit to China in October 2004 was a clear
indication of Beijing's and Moscow's abhorrence of
the Bush administration's unilateral foreign
policy. The statement noted that China and Russia
"hold that it is urgently needed to [resolve]
international disputes under the chairing of the
UN and resolve crisis [sic] on the basis of
universally recognized principles of international
law. Any coercive action should only be taken with
the approval of the UN Security Council and
enforced under its supervision..."
Two weeks after this statement was released, and
just prior to the US presidential election,
Beijing's position against US unilateralism was again
made explicit by China's former foreign minister
Qian Qichen - arguably China's most distinguished
diplomat.
In an opinion piece published in
the state-controlled China Daily, Qian ripped
Washington's unilateralism: "The United States has
tightened its control of the Middle East, Central
Asia, Southeast Asia and Northeast Asia." He noted
that this control "testifies that Washington's
anti-terror campaign has already gone beyond the
scope of self defense". Qian went further, stating
that: "The US case in Iraq has caused the Muslim
world and Arab countries to believe that the
superpower already regards them as targets [for]
its ambitious democratic reform program."
To China and Russia, Washington's
"democratic reform program" is a thinly disguised
method for the US to militarily dispose of
unfriendly regimes in order to ensure the
country's primacy as the world's sole superpower.
The China-Iran-Russia alliance can be considered
as Beijing's and Moscow's counterpunch to
Washington's global ambitions. From this
perspective, Iran is integral to thwarting the
Bush administration's foreign policy goals. This
is precisely why Beijing and Moscow have
strengthened their economic and diplomatic ties
with Tehran. It is also why Beijing and Moscow are
providing Tehran with increasingly sophisticated
weapons.
Jephraim P Gundzik is
president of Condor Advisers, Inc. Condor Advisers
provides emerging markets investment risk analysis
to individuals and institutions globally.
Please visit us for further
information.
(Copyright 2005 Asia Times
Online Ltd. All rights reserved. Please contact us
for information on sales, syndication and republishing.) |
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