The US hopes that the sanctions will shift the cost-benefit analysis of Chinese investors, making them worry about their ability to implement their projects without access to sophisticated Western technology or repatriate the profits sufficiently to discourage many of them from engaging in extensive commerce with Iran.
If this approach is to work, an early indicator could well be the enormous South Pars gas field located beneath the Persian Gulf. The increasing range of sanctions, negative publicity and frustrations at dealing with the Iranian bureaucracy have recently prompted Royal Dutch Shell, Repsol, OMV, Total and other major Western energy firms to end their projects there. The China National Petroleum Corporation remains the largest foreign investor, but it’s unclear whether CNPC has the technology and expertise to extract the natural gas and ideally convert it into liquefied natural gas.
And Washington isn’t only appealing to Chinese commercial considerations. China’s leaders presumably wish to avoid a major confrontation with Washington over the Iran issue and have shied from appearing too close to its controversial president, Mahmoud Ahmadinejad (officials declined to meet him when he visited the Shanghai Expo).Enjoying this article? Click here to subscribe for full access. Just $5 a month.
South Korea, meanwhile, has also come under pressure to curtail its economic dealings with Iran, which amounted to approximately $10 billion in 2009. Iran provided South Korea with 8.7 percent of its crude oil last year, making Iran the country’s fourth-largest source of imported oil.
Retaining access to these energy imports is an important consideration for a country almost totally dependent on foreign energy sources as well as nuclear power, while Iranians purchase many South Korean industrial goods in return. Two dozen business conglomerates as well as about 2000 small and mid-sized South Korean companies operate in Iran, and South Korean political and business leaders see long-term business opportunities in Iran’s petrochemical, construction and plant export industries. They worry that if they don’t exploit these sectors, the Chinese will.
The United States hopes to coax Seoul into abandoning its longstanding approach on the Iranian nuclear issues of only doing what’s required of it. But this won’t be easy with South Korean businesses already suffering losses from the sanctions—an August 8 survey found that over half of the South Korean small and medium-sized companies engaged in business in Iran reported suffering financial losses following the adoption of the latest US economic sanctions. Almost a third of the small companies had stopped shipping goods to Iran entirely due to an inability to gain financial credit, collect export payments from Iran, or other reasons.
Kim Ik-ju, director of the South Korean Finance Ministry's International Finance Bureau, said his August 3 meeting with Einhorn was less a consultation or mutual exchange of views than a briefing of what the United States has done and now wants from South Korea. ‘They gave me a very detailed explanation about the sanctions on Iran, about their legitimacy and about how they are going to be implemented,’ he told the Korea Times. ‘So I replied “thank you.”’