China-Iran tango threatens US leverage
BEIJING - After a week of intense bargaining, Iran has again agreed to suspend its uranium enrichment program to avert United Nations sanctions, further undermining US-led international efforts to curb Tehran's nuclear capabilities. And with the emergence of an ever-stronger partnership between China and Iran, Washington's woes are far from over.
This was clearly evident when Seyed Hossein Mussavian, Iran's envoy to the United Nations nuclear watchdog, the International Atomic Energy Agency (IAEA), visited the Chinese capital on the eve of an IAEA board meeting last week to review an investigation of suspect Iranian activities.
The United States contends that Iran is trying to develop nuclear weapons - an accusation that Tehran denies, insisting its nuclear ambitions are for peaceful purposes.
According to Mussavian, Chinese Foreign Ministry officials told him that Beijing wants to see Iran's nuclear program handled by the Vienna-based IAEA. "They are against referral of the Iranian issue to the Security Council," he told news agencies. Iran could face sanctions if the investigation is turned over to the UN.
But in agreeing to a comprehensive suspension of all nuclear activities that could yield fuel for nuclear weapons on the weekend, Iran has bought itself more time. The agreement itself was due to be presented to the IAEA on Monday. Under the terms of the deal, Tehran pledged to suspend all activities related to plutonium reprocessing and the enrichment of uranium, a process which can be used to create nuclear weapons.
In return, France, Britain and Germany - the European Union's so-called "Big 3" - have offered a package of economic and political carrots, including a promise to build a light-water nuclear reactor.
Iran last week threatened to derail the entire deal by requesting that 20 uranium enriching centrifuges be exempt from the bargain. Under intense international pressure, Tehran withdrew the demand.
How China's energy hunger safeguards Iran
Regardless of the deal, the success of any UN action against Iran hinges on Beijing's support, as it is one of five permanent members of the UN Security Council with veto-yielding power. And China, which has longstanding ties with Iran, just happens to be searching for new energy reserves to drive its booming economy.
Iranian Petroleum Minister Bijan Zandaneh told China Business Weekly recently that Tehran wants China to replace Japan as the biggest importer of its oil and gas. "Japan is our No 1 energy importer due to historical reasons, but we would like to give preference to exports to China," Zanganeh commented during his visit to Beijing in late October.
Earlier this month, Chinese Foreign Minister Li Zhaoxing, who has just crowned a year of negotiations between the two countries, paid a rare visit to Tehran. In a meeting with Iranian President Mohammad Khatami, Li said Beijing would oppose US efforts to refer Iran to the UN Security Council over its nuclear program.
The Chinese foreign minister also told Khatami he had discussed Iran's nuclear issue with US Secretary of State Colin Powell and British Foreign Secretary Jack Straw, and made it known to them that Iran was cooperating well with the IAEA. According to Li, referring Iran to the Security Council would only make things more complicated.
While commercial contacts between Beijing and Tehran are at the core of the relationship, and are set to grow significantly, wider geopolitical elements are also coming into play. Russia, India and other states may be encouraged to break ranks on the nuclear issue if they see China profiting from a strategic relationship with Iran.
Japan, which is even more reliant than China on oil imports, might be unwilling to cede its share of Iran's resources to Beijing and would likely resist US pressure to punish Tehran for nuclear proliferation. There are indications that Tokyo might oppose Washington's efforts to apply sanctions in a bid to force foreign companies to pull out of Iran's oil fields.
China, which has become the world's second largest oil importer over the past decade, currently gets 13.6% of its oil imports from Iran. Beijing has said it also wants to step up imports of Iran's natural gas. Trade between the two countries hit a record US$4 billion in 2003 - with Iran exporting crude worth $2.5 billion to China.
"As China's booming economy has turned the country into one of the biggest oil consumers in the world, Iran - as OPEC's [Organization of Petroleum Exporting Countries'] second-largest crude oil supplier [after Saudi Arabia] - can only be a natural partner for China," Zanganeh told China Business Weekly.
Iran has an estimated 26.6 trillion-cubic-meter gas reservoir, the second largest in the world. One of China's four major state oil companies - the Sinopec Group - is being invited to prepare a master plan for the development of the giant Yadavaran gas field. This means a comprehensive development, including exploration and drilling, petrochemical and gas industries, pipelines and other services.
In return, Sinopec Group will buy 250 million tonnes of Iranian liquefied natural gas over 25 years. The deal, outlined in an October 28 memorandum of understanding between the two sides, is the largest Iran has signed since 1996. The Yadavaran deal could well be worth between $70 billion-$100 billion and could help propel Sinopec into the ranks of the world's major oil players.
In the long term, Beijing also hopes to secure a pipeline project in Iran taking oil 386 kilometers to the Caspian Sea where it could link with another planned pipeline from Kazakhstan to China.
For its part, Tehran is turning to China to build motorways and underground railway lines in the Iranian capital. After completing the first stage of the Tehran Metro, China North Industries Corp (NORINCO) - Beijing's military-run industrial and trade conglomerate - will build a second line in a contract worth $836 million.
NORINCO beat Germany's Siemens and South Korean bidders for the 19-kilometer link and will be the top contender to build four other planned lines, including a 30 kilometer track to the airport.
Meanwhile Iran's increasing appetite for consumer goods is bound to provide huge opportunities for Chinese companies eager to expand overseas. For example, China's home-grown automakers' initial foray overseas took them to Iran where Chery Automobile Co Ltd opened its first overseas production plant in the country in February 2003. Today, the plant manufactures 30,000 Chery cars annually.
China and Iran are currently cooperating on 100-odd different projects, according to diplomats.
The economic ties between two of Asia's oldest civilizations will have broad political implications for the United States. Beijing's inroads into Iran's energy sector will hamper US efforts to keep Tehran under pressure through the economic embargo imposed in April 1995 under then president Bill Clinton and the subsequent Iran-Libya Sanctions Act in August 1996, which sanctions companies that invest $40 million or more annually in oil and gas projects in Iran or Libya.
US officials are also concerned that some Chinese firms may be supplying missile technology and dual-use chemical weapons-related production equipment. In the past, Washington has applied sanctions against 13 foreign companies which have sold dual-use equipment or technology to Iran, including offshoots of NORINCO.
(Inter Press Service)