Iranians wary of deeper ties with China

By Thomas Erdbrink
Wednesday, April 14, 2010; A10

TEHRAN -- In what looks like a strong, budding friendship, China is increasingly buying Iranian oil and gas, participating in Iranian infrastructure projects, and selling vast amounts of exports to Iran while warning the West against tougher sanctions over the country's nuclear program.

China also increasingly shares Iran's anti-Western rhetoric and demands for more influence for non-Western nations.

Yet, according to politicians, businessmen and analysts, few Iranians expect the growing ties to turn into a new, lasting political axis. And there is mounting concern that Iran is becoming too dependent on China, both economically and politically.

Iran distrusts all superpowers, including China, but its own confrontational policies have left the Islamic republic without other international partners. For some Iranians, that is a source of pride.

"Iran does not count on the support of any country, including China," said Kazem Jalali, a member of the Iranian parliament's national security and foreign policy committee. "Like us, the Chinese believe they should have a more important international role," he added.

But others worry that growing reliance on China is limiting Iran's options.

"It's an uneven relationship," said Mohsen Shariatinia, a China analyst at the Tehran-based Center for Strategic Research. He said Iran relies solely on China for many products and needs Beijing's political support, while the Chinese have numerous export markets and can buy oil and gas from many other producers.

"If we needed to distance ourselves from China, who could we approach?" said Abbas Abdi, a political analyst critical of the government. "Russia, or the European Union? The United States?" China, he said, is "our only option, and the Chinese know this."

Now that Russia, which supplies Iran with military hardware and nuclear power plants, is supporting tougher sanctions against Iran, China is increasingly seen here as Iran's only friend among the permanent members of the U.N. Security Council. Beijing insists that any new sanctions must not target Iran's energy supplies.

The sanctions have pushed Iran to renew its embrace of a millennium-old trading partner, a relationship formed during the heyday of the Silk Road, a trade route that connected Asia with Europe.

Awash with petrodollars, partly provided by the energy-hungry Chinese, the Iranian government and private sector have turned to China for the products that Western countries are no longer willing to sell.

Combined trade between the two nations has surged in recent years, rising to $28 billion in 2009 from $12 billion in 1997, said Asadollah Asgaroladi, president of the nongovernmental Iran-China Chamber of Commerce. "And we will pass the $30 billion mark this year," he said.

The trade has made Iran the main importer of Chinese products in the Middle East while allowing China to penetrate one of the region's few markets with no U.S. presence. Simultaneously, Iran has become one of China's main sources of oil, after Saudi Arabia and Angola.

"Iran is extremely important to us, as other markets are controlled by other nations," said a Chinese government official involved in buying oil from Iran.

"This year, we will surpass Japan as the biggest buyer of Iranian crude," he said in an interview, speaking on the condition of anonymity because of the sensitivity of the subject. "We share international concerns over Iran's nuclear program, but are not prepared to give up our interests here."

Iranian businessmen say that because of trade sanctions, Western nations are missing out.

"Iranians have diverted over $50 billion worth of funds toward China," said Asgaroladi, who exports pistachios. "That money could have been spent in the West, helping ailing economies, but sanctions do not allow this. . . . The West has strengthened its opponent."

Iran's ancient bazaars have been swamped with Chinese products, from cheap textiles and appliances to cutlery and condoms. Tehran's new city buses are "Made in China," as are the complex medical scanners used in hospitals.

Local production has been dealt a hard blow.

But cheap imports and oil ties do not mean that China is sure to strongly defend Iran's international interests, analysts say. And if China were to join the U.S.-led push for stronger sanctions against Iran, there is not much Iran could do about it.

"Iran has tried to buy Chinese security against United States policies," Abdi said. "But we have no real power lever to really make sure they remain committed to their support."

Chinese oil companies are involved in six active petrochemical projects in Iran, worth a total of $8.6 billion, an Iranian oil analyst said. "Iran will never cancel those projects, not even when there are political problems," he said. "With Western oil companies avoiding all business with Iran, where else can we go but China?"

The number of actual projects is low compared with the dozens that the two nations have tentatively agreed to pursue, the biggest of which was a $100 billion oil deal signed in 2004. Like many proposed projects, that gigantic oil venture died a slow death.

"Our margins are small," the Chinese government official said. "Sometimes not all contracts are carried out due to technical or political problems." He added: "But for the moment, we have the market for ourselves."

Iranian politicians have not forgotten that the Chinese in 1997 canceled a deal worth $4 billion to provide Iran with missile and nuclear technology. The move came after China struck a bargain with the United States to remove certain trade barriers and resolve sensitivities over U.S. support for Taiwan.

"We are a mere pawn," said Abdi, the political analyst. "In the future, they will decide on how to use us."

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