U.S. Sanctions and China’s Iran Policy

The Financial Times reports that Iran and China are “in talks about using a barter system to exchange Iranian oil for Chinese goods and services, as U.S. financial sanctions have blocked China from paying at least $20 billion for oil imports.”  According to the story, Tehran and Beijing are now discussing how to “offset” the debt, presumably by letting China pay it down with merchandise exports and infrastructure projects.  (As the FT piece mentions, India — another major consumer of Iranian oil imports — is also having sanctions-related difficulties making payments to Iran.)

Having returned recently from China, we are struck by how foolhardy it is for the United States to press, ever more insistently, for China — or any other country — to act against its own long-term interests with respect to Iran.  On the whole, Chinese elites seem to believe that Beijing has gone to considerable lengths to cooperate with Washington over the Iranian nuclear issue.  While China has striven to protect its most important interests in Iran, particularly with respect to oil imports, it has also held back from pursuing potentially significant economic opportunities in the Islamic Republic and from moving ahead on implementing already concluded deals.

In previous trips to China — in 2006, 2007, and 2008 — our impression was that Beijing’s biggest concern about American policy toward the Islamic Republic was that the United States would end up bombing Iranian nuclear targets.  Now we sense that Chinese elites are taking more seriously the proposition that the real problem between America and Iran is not the nuclear issue — and that the real problem may be a more fundamental U.S. unwillingness to accept and live with the Islamic Republic, in contrast to the way that the United States learned to accept and live with the People’s Republic four decades ago.

America’s posture toward Iran is creating more and more problems for China — such as those reported in the FT story.  Beijing continues to have a clear (and strong) interest in avoiding serious disagreements with Washington, over Iran or most anything else.  But we suspect that the two sides are running out of relatively easy compromises where the Islamic Republic is concerned — meaning compromises whereby China agrees to additional multilateral sanctions and puts limits on its own bilateral ties to Iran while America agrees to tailor international sanctions so that they do not fundamentally impede Iranian oil shipments to China and refrains from applying its unilateral sanctions against major Chinese corporations.  The “asks” from the United States can only get harder for China from here on.

The United States cannot forever ask other countries to act in ways that are harmful to their interests.  No country of any consequence can sustain such a course indefinitely.  Either their domestic political dynamics will force a change in course or the exigencies of their strategic situation will.  America pressured Egypt into acting against some of its most basic interests for decades — and former President Hosni Mubarak went over the cliff, politically speaking, at least partly because of it.

China does not strike us as a country that is going to go over a cliff.  By asking China to act against its own interests, the United States may gain some apparent, short-term “victories” with respect to Iran.  But, in the long run, Washington is setting up some potentially serious disagreements with Beijing.

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.  She is also 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 27 July 2011 under a Creative Commons license. 

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