China’s Troubling Iran Ties

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China’s Troubling Iran Ties

Don’t expect a tough Chinese line on Iran’s nuclear efforts. Burgeoning trade will keep calls for harsher sanctions in check.

For the first time, the Chinese government has indicated that it will vote in favour of another UN Security Council resolution imposing sanctions on Iran for its suspicious nuclear activities.

Of the five veto-wielding permanent members of the Council, Beijing has shown the greatest reluctance to adopt additional sanctions on Tehran, perhaps not surprising considering China buys a considerable amount of Iranian oil and sells the Islamic Republic refined gasoline as well as conventional weapons and consumer goods. Indeed, Beijing only consented to the latest round of sanctions after the draft resolution largely left these unaffected.

It’s clear that any discussion of Chinese-Iranian relations needs to start with an acknowledgment that Iran has become one of the most important sources of foreign energy for the People’s Republic of China, supplying Chinese consumers with as much as 15 percent of their imported oil in some years. China’s state-owned companies have established important stakes in Iran’s oil and natural gas sectors and have sold Iranians diverse commercial and military products. Thanks primarily to the growing value of these energy-related exchanges, China-Iran trade has been increasing by an average of 30 percent annually in recent years (according to Beijing’s calculations, bilateral trade reached $27.6 billion in 2008, an increase of 34 percent over the previous year).

As a result of this, China became Iran’s largest trading partner, responsible for about 14 percent of its imports and exports, in 2008. In 2009, the global financial crisis and the decreasing world price for oil resulted in this falling to $21.2 billion, although according to the latest figures, during the first three months of 2010, two-way trade between the two jumped by 47.4 percent from a year earlier.

Iranian efforts to acquire sensitive nuclear technologies, such as the capacity to enrich uranium to manufacture nuclear fuel, have been the main factor complicating Tehran’s relations with China. In December 2006, March 2007 and March 2008, the Chinese delegation reluctantly voted for three UN Security Council resolutions that imposed modest sanctions on Iran. They sought but failed to induce Tehran into ceasing uranium enrichment, a technology that could also be used to make nuclear bombs, and into making its nuclear activities more transparent to the International Atomic Energy Agency.

Throughout this process, Chinese diplomats, in partnership with their Russian colleagues, have worked to weaken the proposed sanctions. In addition, they’ve consistently defended Iran’s right to pursue nuclear activities for peaceful purposes, such as civilian energy production. Even so, Chinese leaders have made clear they oppose Iran’s obtaining of nuclear weapons, a development that could inflame tensions in the Middle East—the source of approximately half of China’s oil imports. Meanwhile, Chinese officials have repeatedly called on their Iranian counterparts to demonstrate flexibility in the nuclear negotiations.

But despite their shared goal of preventing Iran’s acquisition of nuclear weapons, Chinese diplomats have resisted US efforts at inducing Beijing to pressure Tehran into making more concessions on the nuclear issue by curtailing its bilateral ties with Tehran or by imposing comprehensive multilateral sanctions that could disrupt China-Iran energy and commercial exchanges.

In his statement at the April 2009 session of the Geneva-based Conference on Disarmament, Chinese Foreign Minister Yang Jiechi reaffirmed Beijing’s longstanding position that, in approaching proliferation problems, there should be more dialogue and fewer ‘double standards.’ Yang denounced attempts to deny countries their legitimate right to civil nuclear power, insisting that, ‘this right should not be compromised under the excuse of non-proliferation.’ China’s defence white paper, published in early 2009, likewise called for an integrated approach that addresses ‘both the symptoms and root causes of proliferation.’ The paper also states that, ‘China maintains that the Iranian nuclear issue should be resolved peacefully by political and diplomatic means.’

The George W. Bush administration for its part applied several unilateral sanctions on Chinese firms for transferring technologies and other materials that could assist Iran’s ballistic missile development programs. Eager to solicit Beijing’s crucial support regarding North Korea’s denuclearization, however, the Bush administration generally chose not to confront the Chinese government directly about its relationship with Iran or the activities of Chinese companies formally independent of state control.

The Obama administration, confronting dual proliferation threats in Iran and North Korea as well as the need to work with Beijing on economic and climate change, has similarly not vigorously challenged Chinese plans to sell additional nuclear reactors to Pakistan and it has taken constant lobbying by the United States, France, and other governments concerned to get the Chinese to agree to the draft UNSC resolution currently under discussion. At the beginning of the year, the Chinese government signalled its aversion to further sanctions by repeatedly delaying a planned meeting of the five UNSC permanent members plus Germany (P5+1) to discuss the issue. When the session did occur on January 16, the Chinese sent only a junior official rather than the expected deputy minister for foreign affairs.

French President Nicolas Sarkozy made securing sanctions an important agenda item on his April trip to Beijing, where he told Chinese leaders that he understood Beijing’s preferences for further negotiations on the issue, but said that, ‘if dialogue does not work, then we can only use sanctions.’ Although Chinese President Hu Jintao had agreed earlier that month to discuss the possibility of imposing additional sanctions on Iran, the Chinese government had still not made a commitment to support any particular sanctions resolution.

When the draft sanctions resolution was being finalized in mid-May, Chinese Ambassador to the UNSC, Li Baodong, told reporters that his government wanted a ‘well balanced’ resolution designed to affect only Iran’s nuclear policies. ‘The purpose of sanctions is to bring the Iranian side to the negotiating table,’ Li explained. ‘The sanctions are not for punishing innocent people and should not harm normal trade.’ But after US Secretary of State Hillary Clinton made the dramatic announcement on May 18 that the P5 had reached agreement on a draft resolution that she argued contained ‘strong’ sanctions, Chinese Foreign Ministry Spokesman Ma Zhaoxu stated that, ‘We attach importance to and support this agreement.’

Yet in keeping with Chinese and Russian preferences, the draft currently under consideration relies heavily on voluntary enforcement measures and doesn’t constrain energy projects unrelated to nuclear power. On May 20, the president of state-owned China National Petroleum, Jiang Jiemin, said that the resolution wouldn’t affect the company’s projects in Iran, which include developing three new oil and gas fields in Iran and enhancing recovery from a small, older oil field. Other large state-owned Chinese energy companies such as China National Offshore Oil Co. and China National Petrochemical Corp. also have projects in Iran.

The Obama administration apparently has consented to less restrictive language in the current draft in the expectation that even the passage of a weaker resolution would provide sufficient cover for EU governments to adopt their own stricter sanctions. But even so, the depth of China’s commitment to even the current sanctions resolution remains suspect.

Chinese Foreign Minister Yang has repeated his country’s standard line that, ‘China has consistently advocated safeguarding the international nuclear non-proliferation system. At the same time, China considers we should resolve the Iran nuclear issue through the channels of dialogue and negotiations.’ Yang also welcomed the deal Brazil and Turkey made the day before in Tehran to exchange about half of Iran’s stockpile of low enriched uranium for uranium enriched to the higher level needed to fuel Tehran’s medical research reactor.

Brazilian President Lula Inacio da Silva and Turkish Prime Minister Recep Tayyip Erdogan said their ‘breakthrough’ made imposing additional sanctions on Tehran unnecessary, while Yang expressed ‘appreciation for the diplomatic efforts all parties have made to positively seek an appropriate solution to the Iranian nuclear issue.’ Terming the agreement on a trilateral uranium exchange ‘a positive step in the right direction,’ Ambassador Li expressed a distinct lack of enthusiasm for additional sanctions: ‘We think the introduction of the draft resolution represents an opportunity. It is our hope that all the parties concerned can grasp the opportunity to work for a proper solution though diplomacy.’

The subject of Iranian sanctions will undoubtedly be discussed at this week’s China-US strategic and economic dialogue in Beijing. But if ties between China and Iran continue to develop, securing Beijing’s support against Tehran could prove even more difficult in the future.