2012年1月號 - 經濟連線

The Iran Dilemma

International pressure on Iran is at white hot levels over its alleged nuclear weapons programme. The United States and the Europe Union have implemented tougher sanctions, and Israel is itching for conflict, not willing to lose its nuclear supremacy in the Middle East, especially to its arch nemesis. The world has been thrust into two camps, pro or anti-Iran and it has left China in a difficult position.

Paul Cochrane in Beirut

“No smoking gun”

Claims that Iran is just “years away” from possessing a nuclear weapon have been repeatedly stated since 1984. Indeed, in 1992, the US House Republican Research Committee claimed that there was a "98 percent certainty that Iran already had all (or virtually all) of the components required for two or three operational nuclear weapons." Rhetoric has only increased since then.
Under international law, Iran is allowed to develop nuclear power and is a signatory to the Nuclear Non-Proliferation Treaty (NPT). Tehran has stated its nuclear efforts are for peaceful purposes, but the United Nation's International Atomic Energy Agency (IAEA) has found the country in breach of agreements and is accused of a “pattern of concealment.” The latest IAEA report, on 8 November, 2011, noted the “possible existence of undeclared nuclear facilities and material in Iran,” and was swiftly picked up as “proof” by US politicians and the mainstream media that Iran is developing a nuclear weapon. It soon led to additional US sanctions on Iran's banking system and oil industry. The European Union (EU) followed suit with new sanctions at the beginning of December.
However, critics have noted that the IAEA report presented “nothing new” in its assessment of Iran's nuclear capabilities while analysts have noted that recent acts of sabotage against Iranian facilities and the killing of nuclear scientists by unknown assassins have set back Tehran's plans. “Many centrifuges were taken off line because of the virus put through Iran's nuclear research facilities, and scientists have been bumped off. It is a real problem for Iran, and made them more paranoid,” said Professor Anoush Ehteshami, Head of the School of Government and International Affairs at Durham University in England, to International Link.
China has responded warily to the IAEA report. In a commentary, the Xinhua news agency said the UN agency still “lacks a smoking gun,” adding “there are no witnesses or physical evidence to prove that Iran is making nuclear weapons.”
Doubts about Iran's nuclear aspirations have also come from unexpected quarters, notably the United Arab Emirates, which is considered a close ally of the US and has long been wary of Iran's ascendancy in the Middle East. Sheikh Mohammed bin Rashid, the leader of Dubai and Vice President of the UAE, told CNN in early December that he doesn't believe Iran is developing a bomb. “What can Iran do with a nuclear weapon? For example, will they hit Israel? How many Palestinians will die? You think if Iran hits Israel, do you think their city [sic] would be safe? They’d be gone the next day,” he said.
Such an argument does not hold with the Israelis, paranoid that their undeclared position as the only nuclear power in the region – Israel has an estimated 200 warheads - would be undermined if Tehran develops a nuke. Anti-Iranian governments in the Middle East, particularly the monarchies and the Gulf countries, are also against Tehran upsetting the current balance of power, giving rise to fears of a regional nuclear arms race. Indeed, there have been unconfirmed reports that Saudi Arabia helped bankroll Pakistan's nuclear programme in the 1990s with the understanding that if Iran gets the bomb, then Islamabad will station a warhead in the kingdom.
Iran's motivation to have nukes would be to ensure the survival of the regime by preventing a possible invasion, as occurred with its two neighbours, but not to the West's other “rogue state,” North Korea, which has a nuclear arsenal.

Unbreakable ties?

The standoff over Iran has put China in an awkward position with the so-called “international community” and the US government. China has deep ties with Tehran, and consistently opposed US policy initiatives directed at Iran until 1997, when, after 13 years, Beijing agreed that foreign assistance to the Iranian nuclear programme should end. In 2006, when the US pushed for sanctions at the UN, China opposed but did accept symbolic sanctions. Since then, Beijing has opposed any further sanctions against Iran, and has sought a multi-lateral, diplomatic solution to the crisis that emphasizes offering Tehran a carrot, rather than threatening with a stick, to be transparent with the IAEA.
“China is aware that the US has deep issues in the region and does not want, or have the political will, to get too heavily involved, while it is also a supporter of non-proliferation,” said Dr. Kerry Brown, Head of the Asia Programme at Chatham House in London, to International Link.
But China is increasingly in the minority in carrying out what Brown said was a “a studied neutrality.” Out of the 35 nations voting at the IAEA on the Iran file, 24 voted in favour. While significant that Russia did not vote against Iran – and also opposes the new US sanctions – Moscow has a different relationship with Tehran than Beijing: it is not dependent on Iranian energy.
China accounts for 22 percent of Iran's oil exports while Iran is China's third-largest crude oil supplier, shipping 20.3 million tonnes in the first nine months of 2011, an increase of nearly a third on the same period in 2010, according to Chinese data. Bilateral trade is also booming, worth an estimated $30 billion a year, and the Iranians are hopeful this will increase to $100 billion in the future, cementing China's position as Iran's leading economic partner.
“At the core are economic interests, there is a lot of Chinese investment and it sources a lot of oil from there, so China doesn't want to jeopardize that or be isolated,” said Brown. “The Iranians always try to push China for a bigger commitment, and have some due to energy supply.”
Tehran however is wary about China's continued support following India voting against Iran at the IAEA, in 2005, 2006 and 2011. Iran accounts for nearly 13 percent of India's oil imports, and relations have been strained, made worse by India delaying payment of up to $6 billion, which has been further complicated by US banking sanctions against Iran.
“I think deep in their hearts the Iranian's don't trust the Russians or the Chinese, as they are pursuing their own interests,” said Ehteshami. “Iran was very badly stung by India's support for the first round of sanctions as they thought India was the champion of the non-aligned movement.”
China will also have to balance ties with its top oil partner, Saudi Arabia, and other Gulf countries vis a vis Iran, which Tehran is only too well aware of. “The Saudis and Emiratis are not happy about what Iran is doing, and China is a major military partner. The Chinese have to manage those tensions,” added Ehteshami.

Responding to conflict

As the expanded US sanctions take effect, oil companies and financial channels for oil payments to Iran will come under fire from Washington and could be blacklisted from operating internationally. The US is banking on this having a similar effect on China as it has with India. The sanctions will certainly present problems for China's state owned companies, which would be forced to set up complicated holding companies to circumvent the sanctions, as happened in the late 1990s during the UN oil embargo on Iraq.
How China handled Iraq is indicative of how Beijing may deal with the Iran crisis if the situation boils over into war. China opposed the invasion of Iraq in 2003, initially losing its oil investments but has since re-entered the Iraqi oil market.
“I think China would do the same as with Iraq and sit on the sidelines,” said Ehteshami. “No war with Iran will occur unless there are guarantees from other oil exporters for the loss of Iranian oil, and they will try and keep prices around $100 a barrel.”
However, any diplomatic deal ensuring alternative oil supplies would mean negotiating before an attack, placing China in a vulnerable position over the outcome of a conflict, with Iran as well as the global hegemon, the US. “Diplomatically this is possible, but leads to a deep conviction in China that America is active all around it. That is becoming a pre-occupation and Beijing is feeling very contained,” said Brown.
The escalation with Iran equally has to be put into the context of the uprisings in the Arab world over the past year, which caught China unprepared for the changing dynamics in the region, notably in Libya, which had been the country's ninth largest oil supplier.
“China has been playing catch up in the region, as most governments have. That China was the last of the P5 (at the UN Security Council) to recognize the Libyan revolutionaries, after Russia, shows how its foreign policy actors were taken aback and catching their breath,” said Brown. “The last thing China wants is a massive threat, like internal unrest, or ominous signs of an attack, led not necessarily by the US but could be Israel. In that case it wouldn't want to be caught out on a limb like in Libya, it would need to be quicker in its responses.”
The question now is how Beijing will juggle the Iran issue as the crisis mounts, ensuring oil supplies at the same time as hedging its position on the unknown outcomes of a possible war, which would certainly have major economic ramifications globally and could alter the balance of power in the Middle East in more ways than one.