China’s Evolving Calculus on Iran Sanctions

As the United Nations Security Council moves toward a vote on a resolution imposing additional sanctions on Iran over its nuclear activities, China is being remarkably silent, at least in public.  In the wake of the announcement of the Iran-Turkey-Brazil Joint Declaration in Tehran on May 17 and Secretary of State Hillary Clinton’s announcement in Washington the following day that the “P-5” had reached agreement on the main elements of a sanctions resolution, Beijing has said relatively little.

Since mid May, Chinese Foreign Ministry spokesmen have said that China continues to support both tracks of the “dual-track” approach to Iran, that working a new sanctions resolution does not mean that the door to further negotiations is closed, and that any new sanctions approved by the Security Council “should not punish Iranian people or affect their normal life.”  But that’s about it.

At the end of May, China Daily published a notable Op Ed, by the deputy secretary-general of the China Arms Control and Disarmament Association which argued that, with the announcement of the Joint Declaration, “there is no longer any rationality in imposing further sanctions on Iran” and challenging the Obama Administration’s renewed insistence that Tehran must suspend all enrichment-related activities to avoid further sanctions.  When Russian Foreign Minister Sergei Lavrov was in Beijing late last week, he said, following discussions with Chinese officials, that both Russia and China “are against forcing the voting process” in New York.

But, the next day, Russian President Dmitry Medvedev signaled at a joint press conference in Germany with Chancellor Angela Merkel that Moscow is not going to do anything of significance to delay a vote in the Security Council.  That appears to be China’s position as well.

China’s reticence is a powerful indicator of how complicated Beijing’s calculations about the Iranian nuclear issue and multilateral sanctions have become.  Four points are noteworthy in this regard.

First, China succeeded in extracting extensive concessions from the Obama Administration with respect to the content of the specific measures contained in the draft sanctions resolution.  Since 2006, Beijing’s approach to the Iranian nuclear issue has been to give Washington just enough on sanctions in the Security Council to keep the United States in the Council with the issue, while watering down the actual sanctions approved so that they would not impede the development of Sino-Iranian relations.  Fundamentally, China is continuing that approach now.

As we noted on May 19 and have predicted for some time, in order to win China’s acquiescence to a new sanctions resolution, “Washington had to give up on any idea of a ban on new investment or other measures that might have impeded Iran’s ability to produce and export hydrocarbons.”  Not only does China buy a significant portion of its oil imports from Iran; as we have written previously, Chinese energy companies have, since the end of 2007, concluded a growing number of investment contracts for Iranian projects.  Beijing was determined that a new sanctions resolution that would not impede the implementation of those contracts or the conclusion of new contracts by Chinese companies, and the Obama Administration predictably caved on the issue.  Moreover, Beijing appears to have extracted a commitment from the Obama Administration that U.S. secondary sanctions will not be imposed on Chinese energy companies or other entities doing business in Iran.  Chinese diplomats also negotiated the Obama Administration down with regard to the specific Iranian individuals and entities to be identified in the “annexes” accompanying a new sanctions resolution, to ensure that no individual or entity is included that Chinese companies might need to deal with in pursuing their activities in the Islamic Republic.

Second, while China would prefer to delay adoption of a new sanctions resolution in light of the Iran-Turkey-Brazil Joint Declaration, Beijing is not prepared to “stiff” the United States on the matter.  In a post we published on May 31, we anticipated that, as long as Iran continued to act “in what China and other important non-Western players consider a reasonable way regarding implementation of the Joint Declaration,” China would seek to delay Security Council action on new sanctions.  But, in his remarks in Beijing last week, Russian Foreign Minister Lavrov noted that, while Russia and China both opposed “forcing” a Security Council vote on sanctions, “the final version discussed by the ‘six’ focuses entirely on nuclear nonproliferation concerns with maximum regard for the economic and other interests of both Russia and China” — an indication that Beijing as well as Moscow could tolerate the resolution’s premature adoption.

With the Obama Administration seemingly impervious to reason on the subject of the Joint Declaration and, since June 1, a Mexican government presiding over the Council that will accede to U.S. demands for a vote on the draft resolution as soon as possible, the only option that China has to delay action at this point would be by exercising its veto — and Beijing is not prepared to do that over what is, in essence, a scheduling matter.  From Beijing’s perspective, such a course would risk “liberating” Washington to deal with the Iranian nuclear problem outside of the Security Council and could damage important equities in the U.S.-China bilateral relationship as well.

Third, with the passage of a new sanctions resolution in the very near term an almost certain outcome, China is working to manage its relationship with the Islamic Republic and limit any negative fallout on Sino-Iranian relations.  Beyond longstanding and expanding energy ties, Sino-Iranian trade relations are expanding nicely, and China has now replaced Germany as the leading supplier of manufactured exports to Iran.  Against this backdrop, China has been working since mid May to signal the Iranians that passage of a new sanctions resolution should not impede further development of Sino-Iranian relations.  In late May, China offered a one billion Euro ($1.2 billion) loan to finance infrastructure projects in Tehran.  Last week, it was announced that China is negotiating to extend another $1.2 billion in credit to Iran for the construction of six liquefied natural gas (LNG) tankers.

In this context, it is interesting that President Mahmoud Ahmadinejad and other Iranian officials have been fairly outspoken in criticizing Russia’s public expressions of support for moving ahead with new sanctions against the Islamic Republic — but Tehran has been comparatively quiet on the subject of China’s position regarding the draft resolution.

Fourth, Beijing will face new challenges in managing its relations with Brazil and other prominent members of the “global South” — who are likely to feel quite ill-used if the Security Council’s acquiescence to U.S. demands for rapid adoption of a new sanctions resolution in the wake of the Joint Declaration’s announcement torpedoes its implementation.  For some time, Chinese leaders have wanted “to have their cake and eat it too” — that is, for China to be one of the international system’s “big boys,” as a permanent member of the Security Council and a nuclear weapons state, while simultaneously preserving its “street cred” with non-aligned countries.  We expect that it is going to get much harder for Beijing to pull off that balancing act in the future.

Flynt Leverett directs the Iran Project at the New America Foundation, where he is also a Senior Research Fellow.  Additionally, he teaches at Pennsylvania State University’s School of International Affairs.  Hillary Mann Leverett is CEO of Strategic Energy and Global Analysis (STRATEGA), a political risk consultancy.  In September 2010, she will also take up an appointment as Senior Lecturer and Senior Research Fellow at Yale University’s Jackson Institute for Global Affairs.  This article was first published in The Race for Iran on 7 June 2010 under a Creative Commons license.

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