China’s oil needs affect its Iran ties

@B= By SHAI OSTER
@H= China’s dependence on Iranian oil could deter it from backing tougher sanctions on Iran.
China’s trade with the U.S., at $150 billion in the first seven months of this year, dwarfs its $12 billion trade with Iran over the same period. But China is the world’s second-biggest oil consumer after the U.S., and the Persian Gulf country is one of Beijing’s biggest suppliers. Chinese imports of Iranian crude grew to 13 million metric tons in the first half, about 15% of China’s total, and up 22% from a year earlier, according to government data.
With its growing middle class embracing cars, China already depends on imports for half of its oil needs. That ratio will have to increase to make up for the shortfall from domestic production, which can’t grow much more, leaving China eager to keep Iran’s oil flowing unchecked.
“We hope the talks between representatives of six major powers and Iran to be held on October 1 can make positive progress,” Chinese Foreign Ministry spokesman Ma Zhaoxu said. In a statement, the ministry said it hopes “that Iran cooperates” on the issue of the uranium-enrichment plant, and reiterated its stance that nonproliferation should be achieved “peacefully through negotiations.”
Nonetheless, China’s oil companies have been strengthening their ties to Iran’s oil industry in recent months. Chinese state-owned oil companies recently have signed a string of multibillion-dollar deals to develop Iranian oil and gas fields, filling a gap left after Iran’s talks with major Western oil companies collapsed under the growing threat of nuclear sanctions.
Iran is the world’s fifth-largest oil exporter, but years of sanctions and underinvestment have led to declining oil production and crippled domestic fuel refining, forcing the country to import around 40% of its gasoline.
Some big Western oil traders have recently scaled back or are preparing to halt fuel shipments to Iran in anticipation of sanctions, leaving an opening for Chinese fuel traders.
According to official Chinese data, none of China’s gasoline exports have gone directly to Iran, but much of its growing fuel exports head to Singapore, a regional trading hub from which fuel is re-exported to ports across Africa, Asia and the Middle East.
Oil companies in China -- the second-biggest buyer of Iranian crude after Japan -- have stepped up investment. China National Petroleum Corp., the flagship state-owned oil company, has signed billion-dollar contracts to develop oil and natural-gas fields, replacing other foreign companies that have backed out. China’s biggest oil refiner, state-owned Sinopec Group, has also signed on to develop Iranian oil fields.
(Source: The WSJ