Will Asia Nix Iran Sanctions? (Page 2 of 4)

However, such concerns don’t appear to have tamped down the enthusiasm of Chinese firms to take the place of the departing Western companies. In late July, Iran’s deputy oil minister, Hossein Noghrekar, said that Chinese companies had already invested $40 billion in Iran’s energy sector and that Chinese and Iranian representatives were discussing the construction of seven refineries in Iran, which would enormously expand Iran’s capacity to refine its oil into gasoline. The Chinese delegation, meanwhile, refused to support the fourth Security Council sanctions resolution until wording that prohibited foreign investment in Iran's energy sector was removed from the draft text. 

In addition, Chinese government representatives have criticized the enactment of the latest US and EU sanctions as excessively harsh and counterproductive and have instead endorsed holding additional negotiations and dialogue aimed at resolving the Iranian nuclear issue without further sanctions or the use of force. Such moves have prompted US lawmakers including Rep. Howard L. Berman, chairman of the House Foreign Affairs Committee and a leading advocate of stringent sanctions, to warn over possible ‘backfilling’ of withdrawing Western businesses.

This point has not been lost on opponents of sanctions in Asia (and elsewhere) who have argued that the US measures simply enhance the international competitiveness of foreign companies whose governments decline to adopt or enforce sanctions. This was a point taken up by the South Koreans, who Einhorn said had relayed just such a message to him. These concerns are compounded by the fact that Chinese officials have proved reluctant even to comply with the UN sanctions on North Korea, which China voted for in the Security Council, by sharing data about China-North Korean business contacts.

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In addition to Chinese investors in Iran simply ‘backfilling’ for the departing Western firms, US officials also worry that Chinese dealers will circumvent trade sanctions by expanding their use of intermediaries to sell gasoline and other sanctioned products to Iran. Figures for the volume of trade between Iran and China vary depending on whether they include the enormous number of Chinese goods that enter Iran via the United Arab Emirates and other third parties. But by some estimates, the total level of trade had a value of around $36.5 billion in 2009, exceeding the volume of EU-Iran trade that year. Chinese companies have also invested large sums in the Iranian economy, with more than 100 Chinese firms now operating in Iran. 

But the volume of Chinese-Iranian commerce isn’t the only factor discouraging Chinese adherence to unilateral US and EU sanctions. The fact is that many Chinese firms with large economic stakes in Iran just don’t have many (if any) business ties with the United States or the European Union and so aren’t intimidated by the prospect of losing access to Western markets.

US officials have responded to the challenge by trying to link China’s non-proliferation policies to Beijing’s concern for its reputation for meeting its international obligations. At a Seoul news conference, for example, Einhorn told reporters that, ‘We want China to be a responsible stakeholder in the international system and that means co-operating with UN Security Council resolutions.’ Einhorn added that meeting such obligations above all ‘means not backfilling, not taking advantage of the responsible self-restraint of other countries’ (in its defence, China’s Foreign Ministry spokeswoman said her country’s trade with Iran was just normal commercial relations that didn’t harm the interests of other countries or the international community).

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