Why China is Vital for Curbing Iranian Energy Production

The current focus of the UNSC should be to find ways to curb Chinese relations with the Iranian regime, and enact measures that will convince China that not doing business in Iran is in their national as well as in the international interest. China is no longer a nation that can be rationally ignored or pushed to the periphery when contemplating an effective international policy or action. Their relatively rising economy and their subsequent need to maintain and continue the growth of their economy has resulted in China seeking business with any nation that can help them achieve this goal.[i] Not only is China present within the Iranian energy sector, but has established understandings and cooperative agreements that could lead to future Sino-Iranian energy partnerships that would completely undermine the entire international policy toward the Iranian regime. In order to fulfill the first requirement of an effective policy toward the Iranian nuclear program, reconciling Chinese relations and concerns with Iran must be sought after in order to create a unified organ to combat Iran’s apparent belligerence for international norms and security.

In a Reuters article of May 23 there seems to be a re-emergence of the Sino-Iranian issue to the forefront of international speculation and concern;

Speaking in English, Salehi also told an audience of researchers and diplomats that China could trust Iran as a stable supplier of oil to fuel its rapidly growing economy.

The Iranian foreign minister’s visit comes as Western governments continue to press his country over its disputed nuclear ambitions, highlighting China’s importance as an economic and diplomatic buffer for Tehran.

“We said we are ready to receive experts from China, nuclear experts, to come and visit our nuclear installations in Iran,” Salehi said, describing his meeting with the Chinese Foreign Minister Yang Jiechi.

“Rarely any country in the world opens up its nuclear facilities and institutes to the outside world, but since we are certain of the peacefulness of our nuclear activity, we have extended this invitation to a friendly country like China,” said Salehi, who previously ran Iran’s Atomic Energy Organisation.

Salehi appeared to renew something like the offer that Iran made in January to open its nuclear sites to envoys from Russia, China, the European Union and other governments.

In June 2010, the UNSC condemned the Iranian regime for its continual commitment to enrich uranium.[i] European governments, as a response of publicly learning of the Iranian nuclear program in 2002, established a delegation the following year (EU-3), consisting of members from Great Britain, France, Germany and the European Union to initiate diplomatic engagement to Iran with the goal of halting the Iranian enrichment of uranium, it failed miserably.[ii] With the condemnation this past June, the international tone changed when the UNSC member states enacted a wide array of strict new sanctions, including an arms embargo and tough restrictions on Iranian banks and the Revolutionary Guard Corps (IRGC) [note that the IRGC’s sole purpose is to protect the values and continue the Iranian Revolution of 1979 and is not affiliated at all with the Iranian regular army].[iii] Further, UNSC Resolution 1929 also alleviated previous restrictions on individual nations to enact their own form of economic sanctions on Iran, therefore allowing a greater effect of the collective sanctions placed upon the Iranian economy.[iv] To name only a few states, Australia, Canada, Japan, Norway, South Korea, and the European Union have implemented unprecedented measures upon the Iranian economy and limiting investment in Iran. Lastly, the United States Congress passed new sanctions against any company selling gasoline to Iran or investing in Iran’s refining capacity.[v]

Altogether, these measures have resulted in a tremendous and hard-felt burden on the Iranian regime and the state-run economy, which in turn affects the productive capacity of their un-reconciled nuclear development program. It must be duly noted that China is a signatory of this resolution and the measures enacted within it, therefore what is troublesome is their complete lack of regard for the measures they have helped pass and pledged to uphold.

As China’s economy continues to grow and to consume further, so will their need for oil and other energy alternatives to supply that growth (this therefore becomes the major source of contention when the UN attempts to reconcile the Sino-Iranian cooperative measures). Several Chinese national oil companies are currently located within Iran conducting relations with energy officials on potential trade agreements and investment initiatives, as well as selling gasoline to the Iran, which is punishable under current US policy.[vi] This Sino-Iranian relationship is the result of China’s need to expand into all potential energy reserves for its growing economy accompanied by the desperate need for the Iranian regime to find investment to tap into their underdeveloped oil and natural gas reserves, estimated to be one of the largest in the world. The unique relationship is not solely limited to energy agreements, but highly robust in the arms trade (another breach of the UNSC resolution)[vii], mining, transportation, power generation, and consumer goods market, making China Iran’s leading trade partner after that of Dubai.[viii] What Washington and its allies need to do is to attempt to maintain a harmonious relationship with China, a dire consequence of pushing China too far could result in increased Chinese activity and investment within Iran followed by European partners abandoning harsh economic sanctions and re-entering the Iranian economy to keep up with competitive commercial interests.

According to the most recent Reuters article, it states the following about China and its growing oil demand:

BIG OIL PURCHASER

China is nonetheless a big purchaser of oil from Iran, which has been shunned by Western powers who say Tehran is seeking to develop the means to make nuclear weapons. Iran says its nuclear programme is peaceful, and China has repeatedly urged the Western powers to be more flexible in negotiations.

Salehi stressed Iran’s importance as an oil supplier in his comments at the China Institute of International Studies, a government-run think tank.

“It’s probably one of the few — I’m not saying the only — reliable sources of energy that China can depend on, so looking from this perspective, China and Iran they need each other,” he said, adding that his government did not come “under the influence” of other world powers.

The United States has lobbied China to turn more to Saudi Arabia and other more pro-Western states for its oil imports.

The United Nations Security Council has imposed four rounds of sanctions on Tehran for refusing to freeze its uranium enrichment programme.

China has back those U.N. sanctions, but used its veto power as a permanent member of the Security Council to resist demands for more expansive penalties that would cover oil and other major economic ties with Iran.

Trade between Iran and China grew to $29.4 billion in 2010, a rise of 38.5 percent on the previous year, reflecting the oil trade and growing Chinese exports to Iran.

Salehi said that trade could grow to $50 billion “in the next few years”.

To get full Chinese cooperation on these policy efforts, Washington and its allies should commit to the following; recognize that China has more of an economic, national security and harmonious interest in maintaining good US-Chinese relations and a lot to lose from continued Iranian ones. It should recognize that while Chinese oil companies are present and have committed to projects within Iran, the figure of commitment is considerably smaller than the $100-120 billion frequently cited; and further, Chinese crude oil imports from Iran dropped by 35 percent during the first half of 2010 alone, a considerable improvement[ix]. Yet the current present information outlined in the article indicates that this considerable decrease of Iranian oil imports may have been in vain after all. As mentioned  in other posts before on this blog, it would be more conducive for China to follow the lobby of the United States to purchase Saudi oil for the following reasons:

  • Saudi petroleum production levels would satisfy the current energy demands of the Chinese economy;
  • Saudi petroleum would be more readily available, of a better quality, from a trusted sourced;
  • Would be able to increase production capacity and export to meet Chinese demands if necessary, rather than invest in Iranian oil infrastructure, taking time, money and foreign resources (rather costly ), and most importantly;
  • Would be highly more economically advantageous for the Chinese to purchase from Saudi sources given the current Iranian production costs of $15-$17 compared to Saudi Arabia’s total $2-$3 production cost, in regards to the previous point made.

Washington should spend much of its efforts to convince Saudi Arabia, which produces 11% of the world’s crude oil supply[x], along with other Arab oil-producing states, to guarantee some agreements with China on its energy needs, thus resulting in less Iranian enticement for trade agreements. What’s more, the United States should then work ardently to ensure China understands that the Saudi Arabia option offers the best short-term as well as long-term economic and competitive advantage for their country’s current and continued progression, (the more it costs the Chinese to advance and power their economy, the more likely their overall economic growth would be considerably less if business is down with Iran regarding energy concerns).

The US and its partners should take advantage of Iranian rhetoric that has taken on a harsh tone against Chinese partnerships claiming the poor quality of Chinese products as well as disdain for any Chinese cooperation whatsoever on the latest UNSC sanctions.[xi] The United States would have to pursue this policy with caution in that it may harm Sino-American relations in trade and cooperation. Further, increasing the awareness that Iran has repeatedly claimed Chinese products to be of a damaging inferior quality would help China not to increase trade with Iran, thus potentially curbing the anticipated increase in Sino-Iranian trade announced in this article. China however, is solely looking to maximize exports, regardless the quality of their products and so may not respond so attentively to such a dialogue.

Lastly, in an attempt to further sever Iranian and Chinese relations a more concerted effort should be made for Arab states to uniformly denounce China’s treatment of the Muslim population in Xinjiang resulting in Iranian clerics having to follow suit or else look like “bad” Muslim brothers, thus forcing China to cooperate with Arab oil producers to receive their energy needs and to stop their denunciation of the Xinjiang phenomenon. If more Arab countries publicly demand that China resolve the Xinjiang situation where the Chinese are attempting to “Han-ize” the indigenous Muslim population (sometimes with force, and most certainly breaking several humanitarian values and laws) the following could potentially happen:

  • Force China to either solve the situation or figure out a “face-saving” measure that would halt Arab demands for “Muslim justice” by signing energy agreements with Saudi Arabia;
  • Force Iran to follow suit with the Arabs so as to not appear “poor” or “bad” Muslim brothers to the Xinjiang population (this would potentially damage with great effect, Sino-Iranian relations), and;
  • Make known to China and its friendly nations that seeking cooperative measures witht he West serves their interest more than to blatantly go against them.
China is a major issue that needs to be addressed when regarding the effectiveness of the latest UNSC Resolution 1929 in which China is a signatory. China poses the most able and immediate threat to undermine the current trend (that has taken on more support recently with Merkel getting “fully on board”) of sanctions and practices to lessen the economic health and capacity of the Iranian regime. There are several methods to curb Iranian behavior and convince the Chinese that there are more profitable, conducive and beneficial policies to pursue regarding this specific issue that would benefit the West and China simultaneously.
——————————————————————–
[i] Downs, Erica, and Suzanne Maloney. “Getting China to Sanction Iran.” Foreign Affairs. 21 Mar. 2011. Print.

[i] UNSC Resolution 1929. “S/RES/1929 (2010). 9 June 2010

[ii] Gold, Dore. The Rise of Nuclear Iran: How Tehran Defies the West. Washington, D.C.: Regnery Pub., 2009. Print.

[iii] Downs, Erica, and Suzanne Maloney. “Getting China to Sanction Iran.” Foreign Affairs. 21 Mar. 2011. Print.

[iv] Ibid.

[v] Ibid.

[vi] Ibid.

[vii] UNSC. S/RES/1929. 9 June 2010.

[viii] Downs, Erica, and Suzanne Maloney. “Getting China to Sanction Iran.” Foreign Affairs. 21 Mar. 2011. Print.

[ix] Ibid.

[x] Cole, Juan Ricardo. Engaging the Muslim World. New York: Palgrave Macmillan, 2009. Print.

[xi] Downs, Erica, and Suzanne Maloney. “Getting China to Sanction Iran.” Foreign Affairs. 21 Mar. 2011. Print.

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