Kerry Brown
Associate Fellow, Asia Programme

The following article is from the forthcoming March 2010 issue of The World Today.

Where does China stand on Iran and its nuclear plans? The two are tied together by huge energy deals. But Beijing is not best friends with Washington just now, so feels little pressure to help in its dispute with Tehran. Can it continue to stay on the diplomatic sidelines?

The announcement in late January that Iran is China's third largest supplier of crude oil underlined for many the real heart of the relationship between these two countries. Despite all the warm words at the Shanghai Co-operation Organisation, established by China almost a decade ago to bring together central Asian states and Russia, about their close political and diplomatic links - which Iran attends as an observer - energy supply is the one thing that consistently appears in assessments of what holds China back from supporting tougher sanctions through the United Nations on Iran's nuclear programme.

The figures are well known. A 25-year deal between China and Iran in 2004 for liquid natural gas. A $ 100 billion contract the following year for supply from the Yabaravan field. In January last year a further $ 1.75 billion Chinese deal signed to develop the North Azedegan oil field, and, only a few months later, $ 5.2 billion for the South Pars natural gas field. China is Iran's biggest export partner, and sells it back refined oil. This is just the most visible part of the pipeline.

Fuel for the People

Relations with Iran fit into the larger picture of China's burgeoning international energy diplomacy. With soaring energy needs, it cannot be too choosy in the partners it keeps. Beyond Iran, deals with African countries like Sudan and the Democratic Republic of the Congo have brought international condemnation.
As always, internal matters explain Beijing's outward behaviour. With a government which places economic growth at the centre of its legitimacy, and which needs to pump out eight percent gross domestic product increases at least for the next five years, having the energy to achieve this is crucial. The Communist Party will be finished if it fails to improve the economic lot of its people.

The critical importance of energy security was only underlined by the final establishment in January of a national energy commission, headed by Premier Wen Jiabao, pulling together all the different administrative, corporate and financial parts of the state in this critical area. This is not the first time China has tried to systematise its approach to this, cutting across internal vested interests, and supplying unity where frequently there is all too much territorial conflict.

Because of its energy and resource needs, diplomatically, China likes friends. It sticks to diplomat Robert Cooper's observation that 'it is easier, and cheaper, to have friends than enemies.' Perhaps alone among the major powers, it preserves good relations with Middle East Islamic states, but also with Israel. And it almost totally avoids the political flack that gets chucked at America or European powers over claims of meddling in the region, despite the fact that it has such huge investments and interests there.

Some might suspect that China is perfectly happy to see this region as a zone of United States interest, and keep well away from its complex political issues. But as in so many other areas, it is learning that having assets and supply sources abroad almost inevitably brings demands to take a firmer position and get involved with difficult foreign disputes. China's celebrated stance of non-intervention is likely to be tested to exhaustion in the coming months and years, with Iran as the most pressing current case.

Big Background

Ironically, China's energy profile was also one of the key aggravators in the current clashes with the US. China is 75 percent dependent on fossil fuels. This lies behind its environmental problems. US State Department figures say that 25 percent of the air pollution in California is traceable to China. A recent Chinese government survey shows that its own figures for domestic water pollution were understated by as much as fifty percent. And yet the commitment to economic growth, whatever the environmental cost, continues.

China's stance at the December Copenhagen Climate Change summit typified to many other countries its self-interested behaviour. Arguing that the largest responsibility for controlling emissions should go to the US and the European Union, one witness at a negotiating session claimed it stripped out all meaningful targets and benchmarks in any final agreement, leaving the much-criticised accord as the end product.

Wen's perceived snub of US President Barack Obama, sending a junior official to talk to him at a critical part of the negotiations, was taken as a continuation of China's arrogant treatment of him when he went to Beijing and Shanghai at the end of November. But it was also seen as a sign that China was simply shirking its responsibilities. This caused criticism from developing countries too.

Sales of military equipment to Taiwan in January - amounting to over $6.5 billion - deepened the problem. The row over China's currency policy has become a particular target for opprobrium from an America just emerging from recession. There is great anger over the perceived distortion in the international system, with claims China's undervaluation of its exchange rate has created further massive trade deficits.

To make things worse, a clamp-down on dissidents in China, with one of the best known imprisoned for eleven years on Christmas Day, and Obama's meeting with the Dalai Lama in Washington, all happening in quick succession. This is the big background within which the issue of Iranian sanctions is set.

Foot Dragging

Speaking in New York in late January, US Secretary of State Hillary Clinton said that it was in China's long-term best interests to support sanctions against Iran and stop it developing a nuclear weapons capacity. This suggestion that Beijing look beyond the current situation might have some traction.

The Chinese government has largely been a supporter of non-proliferation. After all, it has four nuclear powers on its borders: Russia, India, Pakistan, and North Korea. It has been a proactive supporter of non-proliferation arrangements and treaties. It certainly does not want to see outcomes in the Middle East that would affect its stable supply of energy. Conflict with Iran would impact on this badly. And it doesn't want to be internationally diplomatically isolated. That Russia is bending towards supporting a UN Security Council resolution and tougher sanctions will figure in China's calculations. Going it alone is simply not Beijing's current style.

So despite the poor atmospherics between the US and China at the moment, and despite what is said publicly in Beijing, the likelihood is that China will passively support tougher action on Iran. It will try to preserve its good relations with the regime there by taking a back seat, dragging its feet until the last moment, and then grumbling while falling in line to show Iran that it is doing this against its will, and that, at heart, it is still a good friend. As with other areas, Beijing will show in this way that it can not only have its cake, but also eat it.

But the longer-term question remains. It is one that bedevils China's diplomatic development and will do so as it continues to become one of the world's most powerful economies. How much longer can it continue to keep its head down and be all things to all people throughout the developing world, despite the fact that it has increasing assets and interests to preserve in these areas?

How long can it continue not to take a leading role in the resolution of international issues, even when it would clearly be in its interests to be more actively involved? And most worrying of all, how long will it be before countries like Iran start looking towards China not just for economic backing, but for diplomatic support, in their clashes with the US? Those are the questions that are starting to become clear through the current issue of sanctions and China's support for Iran.