Iran sanctions open door wider for China
By Antoaneta Becker
LONDON - The European Union's new sanctions against Iran over the Middle East
country's nuclear development program appear to open a new space for Chinese
companies to expand their investments in a country viewed as a rogue player by
much of the western world.
With China now Iran's largest trade partner, some Chinese analysts predict a
wealth of new geopolitical and business opportunities with Iran. But
officialdom may still hesitate at the idea of Beijing being seen as a
China has signed agreements with Iran worth tens of billions of dollars to
allow it privileged access to Iran's oil and gas sector. Courting the
partnership of Iran, which possesses the world's
fourth-largest reserves of oil and second-largest of gas, has been a long and
arduous process, and Beijing would loathe to jeopardize it.
In recently published memoirs, China's long-time ambassador to Tehran, Hua
Liming, admitted that his diplomacy in Iran after China became an oil importer
in the early 1990s had been entirely dictated by energy politics. Last year,
Iran accounted for 11% of China's oil imports, ranking third among China's main
oil suppliers after Angola and Saudi Arabia.
Spurred by its energy needs, China has undertaken a range of investment
projects in Iran, gradually filling the void left by Western firms forced out
by international sanctions. With more than 100 Chinese companies present in
Iran, they have helped to build Tehran's subway, power stations, ferrous metals
smelting factories and petrochemical plants.
As bilateral trade reached US$21.2 billion in 2009, China became Iran's most
important trade partner. On paper the European Union still ranks as Iran's
largest trading partner, but if Chinese goods imported in Iran via the United
Arab Emirates are considered, China has already overtaken the EU.
This has led some to believe that Iran's defiant attitude towards the west
derives somewhat from a newfound confidence that China is now supplanting
Tehran's traditional trade partners. "Who can blame Iran for being so ferocious
with China behind its back?" says an opinion piece on one of China's largest
Internet portals, China.com.
With international pressure on Iran to abandon its nuclear program mounting in
the past few years, western companies began reducing their dealings with Tehran
further, and Iran turned more to China for investment in its oil and gas
sectors, says Harsh V Pant, professor in the Department of Defence Studies at
King's College, London.
The new round of sanctions agreed by the European Union means that "China will
remain Iran's most significant major power supporter, and there will be little
incentive for Tehran to negotiate in good faith," Pant told Inter Press
The sanctions target the oil and gas industries - the backbone of Iran's
economy - as well as foreign trade and financial services. They ban new EU
investments in the energy sector and the export to Iran of key equipment and
technology for refining and for the exploration and production of natural gas.
The EU foreign ministers announced the new restrictions a month after the US
imposed its own strengthened sanctions on Iran. Last month, the UN Security
Council passed a fourth round of international sanctions over Iran's
clandestine nuclear program. China, a UN Security Council member,
inconspicuously lent its support.
"Even though China does not want to be seen as ganging up with the West and
hopes to maintain a strategic partnership with Tehran, it does not want to
complicate relations with Washington either," said Jonathan Holslag, research
fellow with the Brussels Institute of Contemporary China studies.
Holslag believes Beijing has given "subtle but clear signals that it wants Iran
to cooperate with the UN". He points to Beijing's decision to slow down
investment in the Yadavaran oil field and delay the disbursement of loans. When
Iranian President Mahmud Ahmadinejad visited the Shanghai Expo, Chinese leaders
reportedly refused to meet him.
With China called upon to become a "responsible stakeholder" in the
international system, Beijing has walked a fine line, trying to work in concert
with the international community to force Tehran to abandon its nuclear weapons
program, while preserving its vital interests in Iran. Beijing supports
non-proliferation efforts as part of its broader campaign to gain a higher
Attempting to water down previous UN sanctions has not only been for the
purpose of protecting China's energy supplies, said Holslag. He believes the
Chinese elite finds the sanctions counterproductive as they are "the grist for
the mill of Iranian hardliners" and fuel "nuclear nationalism".
On Sunday, China's top diplomat called for fresh nuclear talks and more
diplomatic effort to resolve the standoff over Iran's nuclear program. "China
continues on the path of negotiations" regarding Tehran's nuclear energy
program, Foreign Minister Yang Jiechi said in Vienna.
A recent piece in the Chinese Global Times newspaper claimed that Beijing had
secured tacit agreement from western powers that in any follow-on sanctions
adopted by the US and the European Union, China's interests in Iranian energy
and trade would be protected.
But "the new EU sanctions mean that the Iranian energy sector will continue to
face major constraints in reaching its full potential," said Pant. "And
therefore China will find it difficult to exploit the sector fully."
In his memoirs, ex-ambassador Hua Liming recounts the difficulties China and
Iran faced with securing the flow of Iranian high sulfur crude oil to China in
mid-1990s. Although Iran now exports around 27 million tonnes of crude to China
every year, the lack of know-how and technology still impede the progress of
several Chinese oil exploration and development projects in Iran.