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Oil and Ideology Keep China From Joining Effort to Press Iran

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By John Pomfret
Washington Post Staff Writer
Wednesday, September 30, 2009

In its effort to muster support for sterner action against Iran, the Obama administration will have to overcome China's reluctance to punish a country that is one of its top oil suppliers and a major beneficiary of its energy-related investments.

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The administration's frustration with Beijing is growing. U.S. officials have noted that China has appeared even more reluctant than Russia to take action against Iran after disclosures about its nuclear program. U.S. officials said they are particularly concerned that China has blocked their efforts to target freight-forwarding companies based in Hong Kong that reship goods, including prohibited weaponry, to Iran.

The Chinese "have not displayed a sense of urgency" on Iran, said a senior administration official. Instead, the official said, China has attempted to "have it both ways," preserving its relationship with Iran while also working with the United States and other countries involved in the effort to prevent Iran from developing a nuclear weapon.

Why is China protecting Iran? Two reasons, analysts say: oil and ideology.

Iran is China's second-biggest supplier of oil, and imports are rising. In a country where more people are expected to buy cars this year than in the United States, China's appetite for oil is unquenchable.

Furthermore, China's rapid economic growth is the ruling Communist Party's single most important claim to legitimacy. Tougher economic sanctions against Iran would probably cause the price of oil to spike in China, threatening its economic juggernaut.

China's investments in Iran also lessen the likelihood that Beijing will support enhanced sanctions. China's state-run oil behemoths have committed so much money to Iran -- an estimated $120 billion over the past five years -- that analysts estimate that its engineering firms will not be able to handle all the work.

Over the past five years, Chinese firms have moved in on projects that Western and Japanese firms have left dangling. In 2004, Sinopec, also known as China Petroleum and Chemical Corp., signed a $70 billion deal to develop the Yadavaran oil field and buy 10 million metric tons of liquefied natural gas from Iran every year for 25 years.

In June, China National Petroleum Corp. signed a $5 billion contract with National Iranian Oil Co. to develop the massive South Pars gas field, after the Iranians accused French oil producer Total SA -- which had signed an initial agreement to develop the fields -- of delaying the project.

"While we in the West are going through economic hari-kiri, the Chinese are out there taking all of the oil and gas deals," said Michael Economides, professor of chemical engineering at the University of Houston and author of the forthcoming "Energy: China's Choke Point." "The Chinese don't look at Iran as the country of the mullahs that everybody is afraid of; they look at it as a country with lots of oil and gas. Every time I go to China, they ask me, 'Why are you in the West letting us have it so easy?' "

China's investments are also helping shield Iran against the prospect of what Secretary of State Hillary Rodham Clinton contended last week would be "crippling" sanctions. Specifically, Sinopec Engineering has signed contracts worth more than $5 billion to either expand or build four refineries there.

Gal Luft, executive director of the Institute for the Analysis of Global Security, said Iran has dropped its reliance on gasoline imports from 40 percent to 25 percent. That explains, in part, why Western powers appear less interested than they once were in targeting such imports with sanctions.


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