China walks the tightrope in the Persian Gulf

The Hindu reports: Without undermining its ties with Iran despite growing military tensions in the region, China, is seeking a deeper engagement in the oil and gas sector with Saudi Arabia and other Arab Gulf states, as part of a developing contingency plan, in order to ensure stable energy supplies.

Chinese Prime Minister Wen Jiabao has just concluded a visit to Saudi Arabia and has arrived on Monday in the United Arab Emirates (UAE), as part of a regional tour, which will also take him to Qatar, a leading international natural gas exporter.

The visit takes place shortly after Timothy Geithner, the Treasury Secretary of the United States, journeyed to Beijing to implore the Chinese leadership to scale down its energy dependence on Iran, China’s third largest supplier of oil. Washington is trying to throttle Iran’s oil exports, apparently, to dissuade Tehran to acquire nuclear weapon capability—a move that Iran has countered by threatening to close the Strait of Hormuz through which 20 per cent of the world’s oil supplies pass.

China, as was evident during Mr. Geithner’s visit has rejected acceptance of a linkage between oil exports by Iran, and its atomic programme. Nevertheless, Beijing appears to have adopted a double track approach-of keeping Iran engaged while expanding energy ties with Tehran’s Arab foes, chiefly Saudi Arabia.

“Wen’s visit shows that China is seeking to reinforce its energy security in the region, but it does not necessarily mean that Beijing no longer regards Iran as a major oil supplier,” said Han Xiaoping, chief information officer of the China Energy consultancy. Speaking to the Chinese daily Global Times, Mr. Han acknowledged that if “the Strait of Hormuz is blocked, 40 percent of China’s total oil imports will be affected, and the country would face a major energy crisis”.

Meanwhile, Bloomberg reports: China stands to be the biggest beneficiary of U.S. and European plans for sanctions on Iran’s oil sales in an effort to pressure the regime to abandon its nuclear program.

As European Union members negotiate an Iranian oil embargo and the U.S. begins work on imposing sanctions to complicate global payments for Iranian oil, Chinese refiners already may be taking advantage of the mounting pressure. China is demanding discounts and better terms on Iranian crude, oil analysts and sanctions advocates said in interviews.

“The sanctions against Iran strengthen the Chinese hand at the negotiating table,” Michael Wittner, head of oil-market research for Societe Generale SA in New York, said in a phone interview. While there are no confirmed numbers, Chinese refiners are likely to win discounts on Iranian crude contracts as buyers from other nations halt or reduce their purchases of Iranian oil to avoid being penalized under U.S. and European sanctions, he said.

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Comments

  1. Isn’t it ironic of sorts, that while the U.S. is spreading itself around the globe, China is doing the same thing in the oil patch? The bully on the block could end up begging for oil to keep the military running. Of course, the fools playing this game of lyres poker don’t realize that the deck has been changed, the cards they hold are no good.