Whether or not Beijing defies US sanctions, China’s roots in Iran are already deep

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Iran's Foreign Minister Mohammad Javad Zarif shakes hands with his Chinese counterpart Wang Yi after a joint press conference in Beijing. Photo: AFP/Greg Baker

In the wake of the Trump administration’s decision to unilaterally withdraw from the Iran nuclear deal, global firms that have dipped their toes in the Iran market are left with few good choices.

The UK, France and Germany struck a defiant tone after the decision, urging the US not to prevent other countries from maintaining the status quo under the 2015 agreement.

“We urge the US to ensure that the structures of the JCPOA (deal) can remain intact and to avoid taking action which obstructs its full implementation by all other parties to the deal,” the statement provided by UK Prime Minister Theresa May’s office said.

It added that the three countries remain committed to “ensuring the continuing economic benefits to the Iranian people that are linked to the agreement.”

But the US is threatening that companies which fail to adhere to sanctions, once unilaterally re-imposed by Washington, will face fines.

Most expect that the decision will effectively close Iran off from the West. That is leading to speculation about how much China will be willing to stick out its neck to fill the gap. National Iranian Oil Company, for example, suggested that China National Petroleum Corporation would take over French firm Total’s share of a US$5 billion deal to develop the massive South Pars gas field.

Some worry that any defiance of US sanctions will only hurt Chinese firms.

“Trump’s move will undoubtedly push Iran closer to China and Russia in the political sphere, but in practical terms this won’t do China any good,” Li Weijian, a Middle East expert at the Shanghai Institute of International Studies was quoted by The South China Morning Post as saying. He cited the recent high-profile case of Chinese tech firm ZTE, which has been subjected to a crippling ban on purchases of US-made components for violation of Iran sanctions.

Others say that, with Iran’s door closed to the West, China is ultimately the winner, per Bloomberg:

“[Iran’s] trade with China has more than doubled since 2006, to $28 billion. The biggest chunk of Iran’s oil exports go to China, about $11 billion a year at current prices.

“China is ‘already the winner,’ said Dina Esfandiary, a fellow at the Centre for Science and Security Studies at King’s College in London, and co-author of the forthcoming ‘Triple Axis: Iran’s Relations With Russia and Cihina.’

“Iran has slowly abandoned the idea of being open to the West,’’ she said. “The Chinese have been in Iran for the past 30 years. They have the contacts, the guys on the ground, the links to the local banks.’

“And they’re more willing to defy U.S. pressure as Trump slaps sanctions back on.”

Despite China’s strong ties with Iran, ramifications of Trump’s decision will have a wide-ranging impact and will force China to diversify trading partners.

“Russia is an appropriate option,” China’s Global Times suggested. “Since the US imposed economic sanctions against Russian companies and business elites, Russia has begun to pivot to the East. China has certainly been at the center of Russia’s efforts to increase its presence in Asia’s crude oil market.”

“A second China-Russia oil pipeline began operation in January,” according to Global Times, “doubling China’s annual imports of Russian crude oil to 30 million tons through pipelines.”

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