China�s Stakes in the Iranian High-Risk Game

The wager over Iran’s nuclear ambitions is rising by the day, with the latest overture from the European Union (EU), responding to which, Iranian President, Mahmoud Ahmadinejad has said that Tehran is ready to hold talks over its nuclear energy programme with the five permanent members of the UN Security Council plus Germany (G5+1) ‘if preconditions were met’. This statement in all likelihood shall draw mixed reactions from the international community. Earlier, both Iranian Foreign Minister Manouchehr Mottaki and Iran’s chief nuclear negotiator Saeed Jalili, had welcomed the EU's Foreign Affairs Chief, Catherine Ashton’s offer for resumption of talks.

In this context, the role played by the People’s Republic of China towards resolution of the debate surrounding Iran’s nuclear programme holds immense significance. It provides an insight into Beijing’s long-term plans in Iran. In its latest statement on the issue, Chinese Foreign Ministry spokesman, Hong Lei, has called for all relevant parties to restart talks stressing, “China has always advocated for a peaceful resolution of the issue through dialogue and negotiations.”

China’s ever-growing appetite for energy sources to suffice its growth requirements is well-known and that Iran fulfills a substantial part of that craving is evident since they are a major supplier of crude oil to China. It is important to note here that the world’s second-largest consumer of oil, China, receives nearly 11 per cent of its oil imports from Iran. A potential disruption to its oil and gas supplies would consequently cause a setback to the PRC’s development in those sectors, thus hampering Beijing as it jostles to guarantee that its thriving economic growth stays on track.

Beijing’s crude oil purchases from Tehran hit one of the all-time highs at approximately 595,000 barrels per day. The Chinese customs data has ranked Iran amongst the third-highest in this sector following Saudi Arabia and Angola.

Additionally, it would be pertinent to mention that in the past too, China has been resisting imposition of stringent sanctions against Iran—the world’s fourth largest oil producer. China shares a close and budding economic and military relationship with Iran and Beijing’s appetite for oil and its heavy investments in Iran surely affect its stance on Tehran’s nuclear issue. In 2004, China consumed 6.5 million barrels of oil a day and overtook Japan as the world’s second largest user of petroleum products. Moreover, China’s state-owned oil giant Sinopec signed a $70 billion deal with the Iranian government in November 2004 so as to develop the Yadavaran oil field. According to the US Department of Energy, this field on completion would likely produce 300,000 barrels a day, giving China the required quantum of oil for its energy requirements.

Moreover, Chinese firms have also taken up a key role in the development of Iranian energy assets including the South Pars gas field and the Azadegan oilfield. Recently, China's largest oil and gas producer and supplier, China National Petroleum Corporation (CNPC), clinched a deal to develop phase 11 of Iran’s South Pars gas project and further expand its operations in Iran—including a deal to develop Iran’s Azadegan oil field into a 120,000-barrel per day field, estimated at a cost of $2 billion. Thus, it could be these underlying necessities to have prodded Beijing to repeatedly give preference for employing diplomacy over sanctions.

Besides, being primarily dominated by Iran’s energy exports, bilateral trade between Tehran and Beijing was estimated to be worth $21.2 billion, in 2009. According to estimates, bilateral trade grew by 33 percent in value the during the first eight months of 2010, in comparison to the previous year, reaching $18.1 billion, given that China’s exports to Iran grew by 48.8 per cent to close to $7 billion.

A development, which, in due course could be read as a sheer antagonistic move against the US and the West in general, it has been reported that Iran and China have been in discussions over using the Chinese Yuan to settle oil and investment transactions—a pragmatic way to keep them shielded from the Western financial pressure.

The aforesaid realities of Beijing’s Iran dilemma provide a coherent picture in-so-far as two opposing, however equally buttressing facts are concerned. Firstly, Beijing aims to project itself as a dependable stakeholder on the international stage. Upholding the debate against nuclear proliferation provides the perfect platform to do so—visible when China, time and again voted for punitive UN resolutions against Iran. Nevertheless, on the other hand, in its own limited way, China has managed to provide a sense of reprieve to Iran by firstly denouncing Washington and the EU for imposing their individual sanctions against Tehran and also consistently resisting any proposal that would in turn prove detrimental vis-à-vis its energy and economic ties with Iran.

Beijing continues to struggle in the complex oscillation between its desire for an escalating demand of Iranian oil and natural gas and an aspiration to become a decisive focal point in the sphere of global diplomacy.

Dr Monika Chansoria is a Senior Fellow at the Centre for Land Warfare Studies (CLAWS)

(Disclaimer: The views expressed in this article are those of the author and do not represent the views either of the Editorial Committee or the Centre for Land Warfare Studies).