How Much Influence Does China Have on Iran?

As the US and the EU prepare a sanction regime targeting Iranian oil exports in an effort to influence Iran’s nuclear ambitions, China has made careful political steps to distance itself from Iran: a state-owned bank has pulled its investment out of an Iran-Pakistan pipeline construction project, and it has significantly cut its oil imports from Iran. From Bloomberg Businessweek:

China, the biggest buyer of Iranian crude, cut imports by 45 percent in February from a month earlier as the nations disagreed over payment terms.

[...]China’s crude imports from Iran “may rebound in the following months but are unlikely to reach average levels purchased last year,” Gong Jinshuang, a Beijing-based senior engineer at China National Petroleum Corp., said by phone today. “Chinese refiners need to consider the political risk” surrounding U.S. sanctions on Iran, he said.

Despite these moves, according to a US statement of countries who will be exempt for cutting their Iranian oil imports, China is amongst the countries that could still be effected by the upcoming sanctions. The Global Times interviewed former US Deputy Treasury Secretary Stuart Eizenstat and former Chinese ambassador to Iran Hua Liming about how these sanctions could effect China, and the implications of China’s current stance on the sanctions:

GT: China has already stated that it will not comply with the unilateral US sanctions on Iran. How will the US respond?

Hua: The US expects China to stay on its side in sanctioning Iran. But this is merely wishful thinking because China has a huge economic stake in Iran, and it will not give up its national interests for the benefit of the US and Israel. However, it is still too early to predict whether the US will sanction China over this.

Chinese President Hu Jintao has talked to US President Barack Obama on this issue in Seoul, though their priority there is to solve the North Korea nuclear crisis. We still need to wait for more information about their talks.

China has cut some oil imports from Iran. This may draw speculations that China is considering “alternatives.” But this is not true.

China cut oil imports from Iran purely due to market reasons as the price had risen. It was not driven by political factors.

Eizenstat: The Obama administration has considerable leeway under the law to take into consideration factors such as the impact on global oil prices from any sanction.

I would assume there will be intensive bilateral negotiations to avoid a confrontation. But China should see it in its own interests to take positive steps to reduce its dependence upon Iranian oil.

Yesterday The Diplomat took a look at China’s influence on countries whose nuclear proliferation is of global concern, and had this to say in regards to Iran:

In the case of Iran, China isn’t the only important foreign voice that Iran listens to: there’s Russia as well. Yet China will always be a more important market for Iranian energy products, as well as a crucial supplier of various technologies, as ZTE’s controversial sale of surveillance systems to Tehran indicates. Iranian President Mahmoud Ahmadinejad has lately adopted an “us-and-them” formulation in his denunciations of the West, in which China is very much part of his conception of an Iranian “us.” So if Washington makes demands, Ahmadinejad can thumb his nose; but if Beijing makes demands, he has to be a lot more polite – and possibly take the required action. Thus, indications that Beijing may be starting to apply pressure on Iran by reducing oil imports are highly significant, and could even force a shift in Iranian nuclear policy.

Today, another piece in The Diplomat questions how much influence China really has on Iran:

[...]China doesn’t have nearly as much influence over Israel and Iran as some people suggest. The country with the greatest influence over Iran is actually Russia, which has also helped Iran build the Bushehr nuclear plant. And, of course, the country with the greatest influence over Israel is the United States.

Second, the relationship between China and Iran isn’t particularly harmonious. The gradual scaling back in Iran of the largest privately owned communications company in China, Huawei, has caused some consternation in Tehran, while Chinese state energy trader Zhuhai Zhenrong has reportedly had sanctions slapped on it by the U.S. for engaging in the import and export trade in Iran. Meanwhile, Chinese Premier Wen Jiabao’s January visit to the Middle East excluded Iran, despite including other Gulf Cooperation Council countries for discussions on cooperation in the oil business.

Some argue that China’s dependence on Iran’s oil will force Beijing to cozy up to Tehran. However, last month China (along with Japan and South Korea) dramatically cut the levels of oil imported from Iran. The fact is that China has been keeping its distance from Iran to help preserve its own image on the international stage.