China Should Act Responsibly on Iran

October 2008

by John W. Garver

Posted October 11, 2008

Since 2002 when revelations regarding Iran’s previously clandestine nuclear programs surfaced, China has sought to balance between cooperation with the international community and currying favor with Iran. Thus far, this has worked fairly well for Beijing. It has allowed Beijing to win kudos from Washington for being a “responsible stakeholder” by agreeing to the various United Nation's Security Council resolutions. At the same time Beijing has won gratitude from Tehran for delaying and watering down sanctions. Throughout all this, Beijing has tapped ever-larger quantities of Iran’s oil while demonstrating to Tehran, a major regional power, that China is a reliable partner.

This traditional Chinese approach is now reaching the limits of utility. China’s economic clout is simply becoming too great. If it is not used to nudge Tehran toward cooperation with the International Atomic Energy Agency and the Security Council to verify that Iran’s nuclear programs are entirely of a non-military nature, it will help protect Tehran from sanctions. The result could be intensified rivalry and insecurity in the Gulf, chain-reaction nuclear weaponization across the Middle East, or even war. None of these outcomes comports with China’s basic interest in stable, secure access to Persian Gulf oil.

As the United States and Europe have stepped up economic sanctions against Iran over the past year, China has, in effect if not intentionally, stepped in to undercut those sanctions. China agreed in early 2006 to “report”—but not “refer” as Washington initially proposed—Iran to the Security Council. Then in July 2006 Beijing supported Security Council Resolution 1696 “demanding” that Iran cease uranium enrichment and reprocessing activities within 31 days. Washington had proposed 14 days; the term was extended at Beijing’s and Moscow’s suggestion. In March 2007 China agreed to a set of modest sanctions in Security Council Resolution 1747, with a list of 25 Iranian entities with whom U.N. members are to required to “exercise vigilance” in their dealings. The U.S. had favored an outright ban on dealings. Finally, in March 2008 China agreed to add 13 additional Iranian names to the sanctions list. China did not threaten use of its veto. But it did use its consent to delay and water down U.N. actions.

None of the U.N. sanctions carried much of a bite. More meaningful economic pressure on Tehran has come outside the United Nations. In October 2007 the United States banned U.S. citizens and firms from doing business with a wide array of Iranian firms. Washington subsequently began pressing foreign governments, especially in Europe, to take similar action. U.S. and European actions have increasingly pinched the Iranian economy, an effect reflected (in part) in declining trade levels between Iran and European countries. Yet as Iran’s economic ties with European countries have slowed, China’s trade with Iran has accelerated. Since early 2005 China has been Iran’s major trading partner. China’s 2007 two-way trade with Iran very substantially exceeds that of other countries.

Beijing has also stepped in to assist Iran’s energy development efforts. In 1996 the United States passed legislation mandating punishment of any foreign “person” that invested $20 million or more in Iranian energy projects. European governments railed against the “extra-territorial” aspects of this legislation, but as Tehran has become more intransigent over the past couple of years, European governments have held back from such projects. In December 2007, however, China’s Sinopec signed a contract worth $2 billion finalizing development of a large, new oil field at Yadavaran.

Beijing shows no sign of adopting a less equivocal, potentially more effective, approach. In July 2008 Tehran responded with derision to a European package of incentives presented at 6-power talks at Geneva, and then responded to a European plea that Iran freeze its enrichment (implicitly dropping the demand that Tehran suspend such activity) by announcing that it had turned on several hundred more enrichment centrifuges. The incentives Europe offered were admittedly modest, but Tehran did not explore the possibility of bidding them up. In the background of the talk were U.S. signals of willingness to establish a diplomatic mission in Tehran for the first time since 1979. Responding to such Iranian belligerence, China’s assistant foreign minister mouthed Beijing’s old platitudes: continue talking, avoid confrontation, and so on.

But this now-traditional Chinese approach is fast approaching the limits of its utility. By refusing to use China’s immense leverage with Iran to nudge Tehran toward verifying to the International Atomic Energy Agency (IAEA) and the Security Council that Iran’s nuclear programs are not in pursuit of nuclear weapons, Beijing is allowing the Persian Gulf to drift toward increased instability that is not in China’s own best interests. The two probable outcomes of the current course of events over the Iran nuclear imbroglio are these. First, war triggered by Israeli pre-emptive attack, with or without U.S. support. Or, second, increased international rivalry via increased Iranian assertiveness once Iran possesses nuclear weapons or the capability to fabricate those in short order. The already wobbling Nuclear Non-Proliferation Treaty regime would also be further weakened, perhaps fatally by Iranian nuclear weapons capability. None of these outcomes is in China’s interests. Nor the world’s.

Many in China believe that the Middle East is far away, and that greater difficulties there are not only remote from China, but in fact may constrain the United States and divert its attention from the western Pacific. From the standpoint of China’s strategic interests, this perspective is not without merit. The problem is, however, that the Middle East supplies about 50 percent of China’s imported oil. In spite of a decade of efforts to diversify China’s oil imports away from the Middle East, the percentage supplied by that region has not changed much. Nor is it likely to change in the foreseeable future; the Middle East simply contains too much of the world’s petroleum. War involving Iran would cause oil prices to spiral further upward and perhaps precipitate a global recession. Either event would have a serious adverse impact on China’s development drive. Nor are war and greater international rivalry the route to greater international investment in Iraqi and Iranian oil fields that could significantly boost global supply. Simply stated, China’s core interests in the Persian Gulf region are the same as those of the United States and Europe: the stable, uninterrupted flow of oil from that region at reasonable prices. China’s current policies do not serve that interest.

A shift in Chinese policy on Iran would put great pressure on Iran. While Russia has military technology, its firms simply do not have the capital, entrepreneurial skills, or technology to modernize Iran’s economy as Chinese firms do. As indicated by the figure above, Russia is simply not among Iran’s major trading partners (although it must be admitted that IMF figures probably do not capture military trade). If China declared its unwillingness to assist Iran’s economic development until Tehran satisfies the IAEA regarding the non-military nature of its nuclear programs, Tehran would have nowhere else to turn. In these circumstances Japan, South Korea, European countries, and probably even Brazil, South Africa, or India would not step in. Tehran would be left with Venezuela and North Korea to grapple with its developmental problems.

John W. Garver is a professor at the Sam Nunn School of International Affairs at the Georgia Institute of Technology in Atlanta, Georgia.