China Looks Both Ways on Iranian Oil

Analysis by Antoaneta Becker

LONDON, Feb 1 (IPS) – China’s response to calls from the West to join an oil embargo penalising Iran for its nuclear programme so far has been to choose the middle course typical of its non-interfering foreign policy of the last 30 years – denouncing sanctions on one hand yet working to protect its national interests on many fronts.

But the decision by India, another major buyer of Iran’s oil, to continue importing from Tehran despite the Western sanctions, will shine uncomfortable light on the powerful nationalist sentiments among the Chinese public and the internal debate raging in China about the future course of its foreign policy.

As Tehran’s largest trading partner and biggest oil customer, China’s position is crucial if the West’s plan to use oil embargo to force Iran to stop uranium enrichment is to succeed.

When the EU announced a ban last week on the 600,000 barrels a day it imports from Iran beginning Jul. 1, the state-owned National Iranian Oil Co. said it “will easily replace European customers.” China, which imports about 20 percent of the Iranian oil and is 50 percent dependent on Middle Eastern oil, has been seen as a natural replacement for the loss of EU purchases.

But Beijing is walking a fine line.

The EU and U.S. sanctions have been widely denounced by a vocal nationalist public that harbours suspicions the West is keen on containing the rise of emerging countries. On Internet forums Chinese netizens have criticised the leadership for “caving in” to western pressure and betraying its allies and true national interests.

“China has been under some sort of U.S. sanctions or other for several decades now,” wrote one. “How can the (Chinese) Communist Party think that abandoning Iran and ganging up with the Americans serves China’s interests?”

Political commentators have noted that the new round of Western sanctions came on the heels of Washington unveiling a new military strategy seeking to counter potential attempts by China and Iran to block U.S. capabilities in areas like the South China Sea and the Strait of Hormuz.

“Beijing has always made the stability of U.S.-China relations the centrepiece of its foreign policy,” says commentator Zhang Liwei. “It is about time that our leadership rethinks this. At a time when the U.S. is clearly trying to contain China, this U.S. focus is not helpful in protecting the country’s global interests and China will lose even more friends. What is happening in the South China Sea should serve as a warning signal.”

Officially, Beijing has shown little enthusiasm for the sanctions. “To blindly pressure and impose sanctions on Iran are not constructive approaches,” China’s foreign ministry was quoted as saying by the state news agency Xinhua, in response to a question on the EU measures.

Beijing modus operandi favours “dialogue and consultation” and Chinese leaders shy from outright public confrontation, bans or military intervention.

Beijing’s strong negative reaction suggests too that despite growing calls internationally for China to become a responsible global stakeholder, it is not ready yet to side with the West on Iran.

“Beijing is in no position to ignore Iran’s position in its energy mix,” says Dr. Harsh V. Pant, professor in the Department of Defence studies at King’s College, London.

“At the moment China’s priorities are energy security and secure oil supplies, especially as the economic climate in China is becoming tenuous. So cooperation with the West on the nuclear issue is not really on the agenda. And often the West forgets that China itself has been one of the biggest proliferators at least until its signing of the Nuclear Non-Proliferation Treaty.”

Moreover, the Asian economic powerhouse has benefited handsomely from the withdrawal of Western companies from Iran by signing a series of contracts in the oil and gas sector worth up to 40 billion dollars.

Other analysts believe that Beijing has been preparing for years for the forthcoming sanctions and a possible military offensive on Iran by shifting some of its Iran oil imports sources to other suppliers like Saudi Arabia.

In a 2010 research with the Jamestown foundation on China’s Iran policy, analyst Yitzhak Shichor argued that the creation of “counter-dependencies” has been underpinning China’s foreign policy since the mid-1990s. Beijing has worked to offset excessive dependence on other countries, especially suppliers of energy and raw materials, by “offering generous aid programmes, transferring arms, investing in infrastructure and expanding export.

“Consequently, China is not as dependent on Sudan or Iran as Sudan and Iran are on China,” he concluded.

So even as Beijing blasted the European Union’s oil sanctions on Iran last week, it also had a strong warning for Tehran.

During a tour of the Middle East in mid-January, Chinese premier Wen Jiabao voiced firm objection to Iran’s threat to close the Strait of Hormuz – the strategic waterway between the Gulf of Oman and the Persian Gulf through which 35 percent of the world’s oil shipments passed last year. Wen also publicly stated that “China adamantly opposes Iran developing and possessing nuclear weapons.”

Wen’s trip took him to the oil-rich states of Saudi Arabia, the United Arab Emirates and Qatar where he negotiated energy deals expected to boost China’s imports from the Gulf countries. Saudi Arabia is already China’s biggest supplier of oil, selling it 1.12 million barrels per day in December, almost twice as much as
Iran.