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China and Iran: The Energy Connection
Kerry Brown | February 24, 2010

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The announcement in late January that Iran is China’s third largest supplier of crude oil underlined for many the real heart of the relationship between these two countries. Energy supply is the one thing that consistently holds China back from supporting tougher UN sanctions on Iran’s nuclear program.

The figures are well known. A 25-year deal between China and Iran in 2004 for liquid natural gas. A $100 billion contract the following year for supply from the Yabaravan field. In January last year a further $1.75 billion Chinese deal signed to develop the North Azedegan oil field, and, only a few months later, $5.2 billion for the South Pars natural gas field. China is Iran’s biggest export partner, and sells it back refined oil. This is just the most visible part of the pipeline.

Relations with Iran fit into the larger picture of China’s burgeoning international energy diplomacy. With soaring energy needs, it cannot be too choosy in the partners it keeps. Beyond Iran, deals with African countries like Sudan and Congo have brought international condemnation.

As always, internal matters explain Beijing’s outward behavior. With a government that places economic growth at the center of its legitimacy, and which needs to pump out 8 percent gross domestic product increases at least for the next five years, having the energy to achieve this is crucial. The Communist Party will be finished if it fails to improve the economic lot of its people.

The critical importance of energy security was only underlined by the final establishment in January of a national energy commission, headed by Prime Minister Wen Jiabao, pulling together all the different administrative, corporate and financial parts of the state in this critical area. This is not the first time China has tried to systematize its approach to this, cutting across internal vested interests and supplying unity where frequently there is all too much territorial conflict.

Because of its energy and resource needs, diplomatically, China likes friends. It sticks to diplomat Robert Cooper’s observation that “it is easier, and cheaper, to have friends than enemies.” Perhaps alone among the major powers, it preserves good relations with Middle East Islamic states, but also with Israel. And it almost totally avoids the political flack that gets chucked at America or European powers over claims of meddling in the region, despite the fact that it has such huge investments and interests there.

Some might suspect that China is perfectly happy to see this region as a zone of US interest, and keep well away from its complex political issues. But as in so many other areas, it is learning that having assets and supply sources abroad almost inevitably brings demands to take a firmer position and get involved with difficult foreign disputes. China’s celebrated stance of non-intervention is likely to be tested to exhaustion in the coming months and years, with Iran as the most pressing current case.

China’s stance at the Copenhagen Climate Change summit in December typified to many other countries its self-interested behavior. Arguing that the largest responsibility for controlling emissions should go to the United States and the European Union, one witness at a negotiating session claimed it stripped out all meaningful targets and benchmarks in any final agreement, leaving the much-criticized accord as the end product.

Wen’s perceived snub of US President Barack Obama, sending a junior official to talk to him at a critical part of the negotiations, was taken as a continuation of China’s arrogant treatment of him when he went to Beijing and Shanghai at the end of November. But it was also seen as a sign that China was simply shirking its responsibilities. This caused criticism from developing countries too.

Speaking in New York in late January, US Secretary of State Hillary Clinton said that it was in China’s long-term best interests to support sanctions against Iran and stop it developing a nuclear weapons capacity. This suggestion that Beijing look beyond the current situation might have some traction.

The Chinese government has largely been a supporter of nonproliferation. After all, it has four nuclear powers on its borders: Russia, India, Pakistan and North Korea. It has been a proactive supporter of nonproliferation arrangements and treaties. It certainly does not want to see outcomes in the Middle East that would affect it stable supply of energy. Conflict with Iran would impact on this badly. And it doesn’t want to be diplomatically isolated internationally. That Russia is bending toward supporting a UN Security Council resolution and tougher sanctions will figure in China’s calculations. Going it alone is simply not Beijing’s current style.

So despite the poor atmospherics between the United States and China at the moment, and despite what is said publicly in Beijing, the likelihood is that China will passively support tougher action on Iran. It will try to preserve its good relations with the regime there by taking a back seat, dragging its feet until the last moment, and then grumbling while falling in line to show Iran that it is doing this against its will, and that, at heart, it is still a good friend. As with other areas, Beijing will show in this way that it can not only have its cake, but also eat it.

But the longer-term question remains. It is one that bedevils China’s diplomatic development and will do so as it continues to become one of the world’s most powerful economies. How much longer can it continue to keep its head down and be all things to all people throughout the developing world, despite the fact that it has increasing assets and interests to preserve in these areas?

How long can it continue not to take a leading role in the resolution of international issues, even when it would clearly be in its interests to be more actively involved? And most worrying of all, how long will it be before countries like Iran start looking toward China not just for economic backing, but for diplomatic support in their clashes with the United States? Those are the questions that are starting to become clear through the current issue of sanctions and China’s support for Iran.

Kerry Brown is a senior fellow at Chatham House.




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