18-11-04

A major new alliance is emerging between Iran and China that threatens to undermine US ability to pressure Tehran on its nuclear program, support for extremist groups and refusal to back Arab-Israeli peace efforts.

The relationship has grown out of China's soaring energy needs -- crude oil imports surged nearly 40 % in the first eight months of this year -- and Iran's growing appetite for consumer goods for a population that has doubled since the 1979 revolution, Iranian officials and analysts say.

An oil exporter until 1993, China now produces only for domestic use. Its proven oil reserves could be depleted in 14 years, oil analysts say, so the country is aggressively trying to secure future suppliers. Iran is now China's second-largest source of imported oil.
Economic ties between two of Asia's oldest civilizations, which were both stops on the ancient Silk Road trade route, have broad political implications. Holding a veto at the UN Security Council, China has become the key obstacle to putting international pressure on Iran.

During a visit to Tehran, Foreign Minister Li Zhaoxing signalled that China did not want the Bush administration to press the council to debate Iran's nuclear program. US officials have expressed fear that China's veto power could make Iran more stubborn in the face of US pressure.
The burgeoning relationship is reflected in two huge new oil and gas deals between the two countries that will deepen the relationship for at least the next 25 years, analysts say. Earlier, the two countries signed a preliminary accord worth $ 70 bn to $ 100 bn under which China will purchase Iranian oil and gas and help develop Iran's Yadavaran oilfield, near the Iraqi border.

Earlier this year, China agreed to buy $ 20 bn in LNG from Iran over a quarter-century. In turn, China has become a major exporter of manufactured goods to Iran, including computer systems, household appliances and cars.
China's trade with Iran is weakening the impact on Iranian policy of various US economic embargoes, analysts here say. Precise trade figures are difficult to get, in part because trade is increasing so rapidly and partly because China's large arms sales to Iran are not included or publicized.

Beijing has also provided Iran with advanced military technology, including missile technology, US officials say. In April, the Bush administration imposed sanctions on Chinese manufacturers of equipment that can be used to develop weapons of mass destruction.
Iran-China ties may be partly a response to the United States, analysts say. President Bush's strategy has been to contain both China and the Islamic Republic, said Siamak Namazi, a political and economic analyst, “so that's created natural allies”.

Source: IranMania