Getting China to Turn on Iran

Over the past decade, as United States employed increasingly robust sanctions to gradually ratchet up pressure on Iran to curb its nuclear ambitions, Washington has struggled with the question of how to elicit more cooperation from China, a major buyer of Iranian crude oil and no fan of sanctions, especially unilateral ones. On June 28, the Obama administration granted China an exemption from U.S. sanctions on the Central Bank of Iran for significantly reducing its crude-oil purchases from Islamic Republic. This suggests that one of the biggest carrots Washington can offer to China in exchange for greater support for the U.S. sanctions regimen is expanded opportunities for China’s national oil companies (NOCs) to invest in oil and natural-gas exploration and production in United States. The greater the stakes that China’s NOCs have in United States, the thinking goes, the greater the chance they will think twice about doing business in Iran. The Chinese government responded to the new U.S. sanctions signed into law by Obama on December 31, 2011, by saying Washington should not expect any cooperation from Beijing. Over past six months, officials from China’s foreign ministry have repeatedly stated that China’s energy trade with, and investment in, Iran do not violate the various United Nations Security Council resolutions on Iran and that the new U.S. sanctions would not affect China-Iran energy relations. Despite Beijing’s implication that China would continue to import oil from Iran at 2011 levels (more than 550,000 barrels a day), the main Chinese buyer of Iranian crude oil, Sinopec, responded to new U.S. sanctions by dramatically cutting its purchases from Iran by 25% in the first five months of 2012. At the end of every year, Chinese oil traders negotiate their supply contracts with National Iranian Oil Company for the following year. The commencement of their negotiations in late 2011 coincided with growing support in Washington, especially on Capitol Hill, for ratcheting up the pressure on Iran by subjecting foreign firms that do business with CBI, primary clearinghouse for Iranian oil transactions, to U.S. financial sanctions. When China’s oil traders sat down at negotiating table with their Iranian counterparts, Iran’s increasing international isolation was palpable. Sinopec pushed for lower prices and a longer credit period, while NIOC insisted on higher prices and a shorter credit period. The two companies did not sign a new contract until late March 2012 (Sinopec reportedly extracting some concessions, which have not been disclosed publicly), causing plunge in China’s crude oil imports from Iran (…..) The ability of United States to secure additional Chinese cooperation may depend in part on the scale of investments made by China’s NOCs in the United States. The more money these companies pump into the American market, the more likely they are to refrain from doing deals with Iran might jeopardize those business prospects. Consequently, creating more welcoming environment for Chinese investments just might have a geopolitical payoff in form of greater Chinese compliance with Iran sanctions. Moreover, letting China’s NOCs take lead in complying with, at least not undercutting, U.S. sanctions on Iran is politically palatable to Beijing. Chinese officials can maintain their public opposition to U.S. sanctions while avoiding increased tensions with Washington over the Iranian nuclear issue. This dual stance is attributable to the business decisions made by China’s NOCs.

Link: http://nationalinterest.org/commentary/getting-china-turn-iran-7215

Acerca de ignaciocovelo
Consultor Internacional

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