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China's economic ties to Iran complicate nuclear issue

BEIJING—Chinese companies operating in Iran churn out new cars, build highways and oil pipelines and toil underground to build subway lines under the capital. Iran, for its part, ships supertankers filled with crude oil back to China. Trade and commerce between the nations is soaring.

That booming economic relationship is one of the reasons that China is so unsettled by the rising global tensions over Iran's nuclear program, so as the United States and major European nations itch to ratchet up pressure on Iran, Beijing is pushing in the opposite direction. Indeed, even as the United States and major European nations feel a sense of urgency to bring Iran to heel, China counsels patience and continued diplomacy.

Beijing is in the hot seat in the crisis. It shares with Iran a certain ideological distance from the West, enjoys major investment there and craves a stable and rising supply of oil from its vast fields. At the same time, China doesn't want to anger the United States, a major trading partner.

"China doesn't want to mess up relations with America. It is unwilling to irritate the United States by adamantly supporting Iran," said Yin Gang, a researcher at the School of West Asian and African Studies at the Chinese Academy of Social Sciences, a research center in Beijing.

Beijing particularly doesn't want strains on Sino-U.S. relations before President Hu Jintao visits Washington in April to meet with President Bush.

China, with its U.N. Security Council veto and its seat on the board of governors of the International Atomic Energy Agency—which will debate the Iran case Thursday in Vienna, Austria—is likely to play a key role in how the world deals with Iran, including whether the U.N. Security Council imposes sanctions.

To understand the conflicting pressures on China, it helps to examine how a convergence of interests in Beijing and Tehran dating back a decade or so prompted China to become a significant investor in Iran.

By 1993, China had become a net importer of oil and had begun to seek stable supplies of Middle Eastern crude. Iran, led by a radical Islamic clergy with few friends in the world outside of Syria, threw open its doors for China.

"Iran has been trying to find an ally with a seat on the U.N. Security Council," said Jalil Roshandel, a political scientist at Duke University in Durham, N.C. "Iran badly needs China."

U.S. sanctions on Iran had cut off major investment by Western companies, and Chinese firms moved in, offering labor, construction know-how, some covert high-tech military assistance and the umbrella of diplomatic support from a veto-wielding nation with one of the five permanent seats on the Security Council.

Today, thousands of Chinese workers toil in Iran and scores of small and large companies operate there, helping to develop a nation that Washington considers a pariah.

A major defense and construction conglomerate, China North Industries Corp. (known as Norinco), built the first line of Tehran's subway system and is constructing a new line with 21 underground stations. Subway riders see plaques on existing cars saying they were built by China's Changchun Light Rail Car Co.

Norinco has direct ties to China's military, and the Bush administration has accused it of proliferating weapons technology, including missile components, to Tehran. The most recent U.S. sanctions came a month ago.

American sanctions also have targeted other Chinese companies, such as Zibo Chemical, Hongdu Aviation and China National Aerotechnology. It isn't public knowledge what weapons technology U.S. officials think they're selling to Iran.

Chinese companies also are building, or have completed, a highway from Tehran to the Caspian Sea and a 240-mile energy pipeline. And China promises to launch a small telecommunications satellite later this year for use by Iran and six other nations. Some experts say it could provide guidance for missiles.

When China's automakers decided to make their first foray abroad, the Chery Automobile Co. set up a factory in Iran in 2003 that now is capable of making 10,000 units a year. Chery plans to export an additional 8,000 cars to Iran this year, a company spokesman said, declining to offer his name.

The biggest Chinese investments are in Iran's oil and natural-gas sector. Two years ago, China's Sinopec Group, one of three major state oil companies, signed a $70 billion deal to develop Iran's Yadavarn oil field in exchange for agreeing to buy millions of tons of Iranian liquefied natural gas over 25 years.

China, which needs foreign oil to keep its economy speeding, already imports 12 percent of its foreign oil from Iran, its No. 2 foreign supplier, after Saudi Arabia. Iranian crude arrives at the rate of 450,000 barrels each day, and the trend is upward.

"Iran is capitalizing on that very much," said Raphael Israeli, a historian on the Middle East at Hebrew University in Jerusalem. "They have got China hooked on their oil production."

Iranian officials are eager to tout China to their citizenry as a faithful partner.

"They want to say, `We are not alone. A great nation like China is our friend, if not our ally,'" Roshandel said.

Just as China kept its head down during the U.N. Security Council debate on Iraq in 2003, it may avoid taking a leading role in forging a policy on Iran, some analysts said.

"They never stand alone," said a Beijing-based diplomat who's following the crisis closely and who declined to be identified because of the sensitive nature of the subject. "That means if the Russians try to go in one direction, the Chinese will go with them."

If sanctions are imposed on Iran eventually over Chinese opposition, Iran may reward China with continued access to its embargoed oil.

"They think America or the West is not likely to impose an embargo on Chinese ships coming to the region because that would cause a major conflict," Israeli said.

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(Knight Ridder Newspapers special correspondent Fan Linjun contributed to this report.)

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(c) 2006, Knight Ridder/Tribune Information Services.

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