Arguably more than any other country, China wants to end international economic sanctions on Iran so it can increase trade. Beijing and Tehran have become increasingly important partners over the past decade. China also does not want to risk sanctions itself for doing business with Tehran, as U.S. law now stipulates.
At the height of business in 2011, China bought up to 557,000 barrels of oil per day from Iran or almost 11 percent of its oil imports to fuel economic growth. (In 2001, China imported 18 percent of its oil from Iran, but the volume was only 217,891 bpd, far less than in 2011.) Among key figures for 2012, according toChinas Ministry of Foreign Affairs:
Sino-Iranian trade totaled $36.47 billion,
China imported $24.86 billion worth of goods from Iran, largely crude oil and mineral oils.
China exported $11.6 billion of goods to Iran, largely machinery, textiles and petrochemical products.
But new sanctions, particularly tough measures imposed by the United States in mid-2012, have had a major impact on the Peoples Republics energy trade with the Islamic Republic. Chinas total oil imports from Iran decreased 21 percent from 557,000 barrels per day to 438,448 barrels per day in 2012. Oil trade dropped another2.2 percent in 2013 to 428,840 barrels per day.
But Beijing and Tehran still see each other as pivotal partners for the future. China is considered a key future investor in Irans oil and gas fields, with great potential to invest in downstream refineries to improve Irans outdated refining infrastructure.
China now shares the concerns of the worlds major powers about Irans controversial nuclear program. Beijing wants to prevent Tehran from developing the worlds deadliest weapon, which would in turn dilute Chinas nuclear power status. Beijing voted for four U.N. sanctions resolutions, although it balked at subsequent more punitive measures sought by the West. Top foreign ministry officials have also participated in the Geneva talks.At the same time, however, Beijing does not want the terms in a long-term nuclear deal to be so demanding that diplomacy failsand sanctions continue. China envisions a final resolution that will protect Irans peaceful use of nuclear technologies, but effectively prevent Iran from developing nuclear weapons.
Chinas near-term goal is to do more business with Iran without facing the threat of being penalized for violating U.S. trade sanctions. The sanctions against Iran, which were announced in late 2011 and took effect in June 2012, subject any bank, company or government that does business with Irans Central Bank to American penalties.
To qualify for the U.S. waiver from the sanctions, issued every six months, Beijing has been forced tocut back its annual crude oil importsfrom Iran since 2012. China calculated that its economic and political interests would suffer more by ignoring the U.S. restrictions, which was also the basic reason for Chinas acquiescence to U.S. sanctions against Iran.
Trade with Iran is critically important because China is now the worldslargest net oil importer, which is calculated as liquid fuels consumption minus domestic production. Chinas dependence on foreign crude is expected to rise to 61 percent by 2015 from 54 percent in 2010. Iran was Chinas sixth-largest oil supplier in 2013, fourth-largest supplier in 2012 and the third-largest r for most of the previous decade. In 2013, China imported an average of428,840 barrelsof oil per day from Iran. The 2012 restrictions on Beijings oil purchases from Iran have in turn undermined Chinas energy security. Economic sanctions have reduced the overall supply on the global oil market, generally driving up the international price.
Economic sanctions also constrain Chinas other trade with and investment in Iran. U.S. sanctions have hindered implementation of earlier agreements. In 2012, China was forced to cancel mega projects such as the $4.7 billion development ofPhase 11 of South Parsgas field, one of the worlds richest reserves, and a $2 billionhydropower project.Sanctions have also obstructed Chinas payment for its crude oil purchases. China owed Iran at least $22 billion for missed payments by the third quarter of 2013, an issue at the top of the agenda when Iranian Parliament Speaker Ali Larijanivisited Beijing in October.
Chinese companies that have been sanctioned by the U.S. for their trade with Iran include:
Zhuhai Zhenrong, a state-owned company with a military background and the largest Chinese importer of Iranian crude oil
the Bank of Kunlun, controlled by Chinas largest oil company,China National Petroleum Corporation.
and Poly Technologies, a subsidiary of state-owned defense company China Poly Group.
Most of Chinas oil comes from the Middle East, mainly countries allied with the United States. Because of those longstanding alliances, Beijing wants its own reliable ally in the region, both to supply oil and to counterbalance American power. China views Iran as the natural choice.
A peaceful settlement of the nuclear dispute between Iran and the six other powersthe United States, Britain, China, France, Germany and Russiawould also improve prospects for regional security, including uninterrupted energy supplies from the Middle East. In recent years, Iranian threats to block the Strait of Hormuz and a possible U.S. or Israeli military attack on Iran have cast a dark shadow over regional stability as well as production and transportation of oil vital to China.Iran is both a policy asset and a liability for China in its relations with the United States. Iran gives Beijing leverage against Washington when Washington needs cooperation on sanctions, but Iran also turns into a liability when Tehran fails to meet Washingtons demands.
China sees the improvement of U.S.-Iran relations as essential to a deal with Iran. Many Chinese analysts contend Irans quest for nuclear technology is due to its sense of vulnerability in the region and from U.S. pressure. Beijing contends that the main solutions lie in improving U.S.-Iran relations and/or developing a new regional security framework. The Chinese are now working to facilitate a dialogue between Iran and the West and lobby Iran to participate in the talks with flexibility and pragmatism, according to Chinese State Councilor Yang Jiechi.
At the same time, however, China does not want Washington and Tehran to get so close that the Sino-Iranian strategic alignment against the United States is undermined. Chinese leaders believe that maintaining strong ties with Iran gives it some leverage over U.S. policy. Irans regional aspirations also differ from Chinas. Beijing is keen on building friendly ties with both Israel and Saudi Arabia, Irans top Middle East rivals.
Failure to reach a peaceful international settlement over Irans nuclear ambitions would be bad news for China. An Iranian nuclear weapon could lead to a regional nuclear arms race, which would be Chinas worst nightmare. But many Chinese analysts believe that Iran will not follow in the footsteps of North Koreaand will not go so far as developing an atomic bomb and testing it.
By Iran Primer
The Iran Project is not responsible for the content of quoted articles.
