Geithner finds Chinese resistant to Iran oil sanctions

ANDY WONG/AFP/GETTY IMAGES - US Treasury Secretary Timothy Geithner (left) meets with Chinese Vice President Xi Jinping (R) at the Great Hall of the People in Beijing on Wednesday.

BEIJING — Treasury Secretary Timothy F. Geithner received no specific assurances here Wednesday in response to his request that China reduce its oil imports from Iran, but Chinese officials appeared more open to U.S. attempts to block Iranian access to international finance through Chinese banks.

The Obama administration wants to target Iran’s oil exports as a way of building sanctions against Iran for its pursuit of a uranium-enrichment program. China is one of the most important customers for Iranian crude, purchasing roughly 22 percent of Iran’s oil last year.

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The United States is acting under new legislation, signed into law by President Obama on New Year’s Eve, that would penalize foreign firms that deal with Iran’s central bank, which handles that country’s oil revenue.

Chinese officials, however, have been reluctant to link economic ties with Iran to the nuclear issue, saying publicly that the two matters should be kept separate.

After meetings in Beijing with China’s top leaders, Geithner received pledges of continued cooperation on broader global economic issues, but no immediate answer on the request to reduce Iranian oil purchases.

On Thursday, Geithner received a more positive response in Tokyo, where Japan’s finance minister said that country will reduce its oil imports from Iran from the current 10 percent.

A senior U.S. official said that Geithner’s visit represented just the start of what is expected to be a difficult mission to persuade Asian countries to reduce their energy reliance on Iran.

“We are in the early stages of a broad global diplomatic effort to take advantage of this new legislation to significantly intensify the pressure on Iran,” said the U.S. official, who spoke on the condition of anonymity, citing the ground rules for briefing reporters. “We are telling them what’s important to us, and they are listening.”

The official added, “We have a reasonable shot at getting a number of countries to wean themselves off Iranian oil.”

Geithner’s visit comes as China announced that Premier Wen Jiabao will travel to the Middle East this weekend, on a trip that will take him to Saudi Arabia, the United Arab Emirates and Qatar. Some analysts said the timing of Wen’s trip — to attend a conference in Abu Dhabi and give a speech on China’s energy policy — could signal that Chinese leaders may be looking for alternative oil suppliers from the region.

“China is quite ambivalent and hesitant at the moment,” said Cui Shoujun, director of the International Energy Research Center at Renmin University in Beijing. He said Wen’s visit to the other oil-producing countries would itself put pressure on Iran, by showing that China was starting to diversify its oil suppliers.

Cui and other analysts said Chinese leaders are keen to keep good economic relations with the United States and want to make sure China adheres to the international consensus regarding Iran. Wen’s trip, they said, would be important for gauging regional opinion.

“China has been dissatisfied with Iran for a long time because of the nuclear issue,” Cui said. “Compared to China’s relations with the U.S., China-Iran relations are a lot less important. If China has to break one of the two, it will definitely be Iran.”

China reduced its monthly purchases of Iranian crude oil in December and January, but those reductions were largely the result of a price dispute, analysts said.

The Obama administration is aware of the political sensitivities in asking energy-hungry countries such as China, Japan and South Korea to cut off their oil trade with Iran altogether. But with the European Union discussing plans to cut off its imports of Iranian oil, Washington wants to make sure countries such as China don’t step in to take up the slack.

Separate from the oil issue, U.S. officials appeared to be making progress in persuading China to curtail its financial institutions’ dealings with Iranian banks.

Geithner and the Chinese leaders found more common ground on the question of how to deal with the sovereign debt crisis in the euro zone, reaching broad agreement that European nations need to show a more forceful response in building a firewall around the most troubled countries. The United States and China, along with Japan, have been holding back on greater intervention in Europe by the International Monetary Fund until Europeans step up their rescue efforts.

The United States and China, although largely bystanders in the euro-zone crisis, have huge stakes in making sure Europe resolves its debt crisis and does not slip further into recession.The nascent economic recovery in the United States could be severely affected by a new downturn in Europe, and China has already seen its exports tumble and its growth projections shaved because of the continued weak demand from Europe.

Statistics released this week showed that China’s trade surplus continued to narrow for 2011 — down 14.5 percent from a year earlier. Export growth also slowed last month to 13.4 percent, down from 13.8 percent in November.

The gloomy statistics have sparked speculation here that Beijing’s leaders are likely to slow, or halt, the gradual appreciation of the renminbi, China’s currency, also called the yuan.

The yuan gained about 4.7 percent against the dollar last year. But with the economy slowing and exports particularly hard hit, many Chinese economists say additional rapid appreciation is unnecessary.

U.S. officials, however, still think that the Chinese currency is undervalued, which has become a potent issue in the American presidential campaign. U.S. officials also have told Chinese leaders that allowing the currency to appreciate is in China’s own interest, as it seeks to increase the purchasing power of Chinese consumers and make the shift from an economy fueled by exports to one sustained by domestic consumption.

In their private meetings, Chinese officials signaled to Geithner that the gradual appreciation would continue during 2012.

“They recognize that their growth strategy leaves them too dependent on external demand” and needs to be altered, the senior U.S. official told reporters.

Geithner’s visit to China, the first this year by an Obama cabinet official, was also an opportunity for American officials to begin sizing up and building relationships with the country’s next generation of leaders, who will take over during a carefully choreographed transition set to start later this year.

Geithner met with Vice President Xi Jinping, who is expected to become secretary general of the ruling Chinese Communist Party in October and then president of China in 2013. Xi hosted Vice President Biden in China in August and is expect to visit Washington this year.

Geithner also met here with Vice Premiers Wang Qishan and Li Keqiang, who are expected to become the second- and third-most powerful people in the Communist Party’s collective leadership apparatus. Their exact positions in the government apparently have not been settled.

Researcher Liu Liu in Beijing contributed to this report.

 
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