China and its Relationship With Iran

The relationship between the developed nations of the world, particularly Canada and the United States, and China is, to put it bluntly, strained at best.  While the Western world does its best to keep the doors of diplomacy with China open, there always seems to be an undercurrent of mistrust.  This is particularly evident when one reads through a report by the Congressional Research Service entitled "China and Proliferation of Weapons of Mass Destruction and Missiles: Policy Issues".  This report discusses the security problems related to China's role in the proliferation of weapons of mass destruction (WMD) as supplies from China through technical aid, longer-range missiles and increased indigenous capabilities (i.e. increased local capability) allow other nations to create their own WMD through the use of China-based technology.   Since this is such a wide-ranging report, I will break it down into at least three country-based postings.

Since Iran and its nuclear capability tend to make the news cycle on a fairly regular basis, let's start this series by looking at China's relationship with Iran's nuclear program.  In the mid-1990s, the Clinton Administration urged China to cancel its "civilian" nuclear projects in Iran by promising to sell nuclear power reactors to Iran.  Since that time, there has been concern about whether or not China has abided by its pledge.  Even though China has voted to support some sanctions against Iran and its nuclear program, it has not authorized the use of force and has continued to invest very heavily (to the tune of at least $55 billion by the end of 2009) in Iran's energy sector.  To give you some idea of the size of China's commitment to energy deals in Iran, here are a few of the larger ones:

1.) Production of LNG at South Pars (the world's largest natural gas field) - $16 billion (2009)

2.) Develop Phase 14 at South Pars - $3.6 billion (2007)

3.) Develop Yadaravan oil field - between $70 and $100 billion (2004 - 2006)

4.) Develop North Azadegan oil field - $1.8 billion (2009)

5.) Production of LNG at South Pars Phase 12 - $3.2 billion (2009)

6.) Investment in Iranian oil refineries - $11.3 billion (2009)

7.) Investment in Iranian oil refineries (2) - $6.5 billion (2009)

Not surprisingly, China has repeatedly opposed sanctions by the U.N. Security Council that would target energy deals.  Since China gets about half of its oil imports from the Middle East with a particularly hefty portion of roughly 550,000 barrels of oil per day coming from Iran, the third largest exporter to China, peace in the region is critical and China's ongoing relatively positive commercial relationship with Iran is particularly critical.  China currently purchases 20 percent of Iran's oil exports, comprising 11 percent of China's oil imports at a value of $21.8 billion in 2011.  In fact, in 2009, the Obama Administration discussed raising the supply of oil to China with both Saudi Arabia and the United Arab Emirates to make up for any shortfall experienced if China should choose to sanction Iran, however, China refused the deal.  Another option being explored that would allow China to achieve its much needed goal of energy security is a scenario that would increase China's exposure to energy investments in the United States, Canada and other Western nations, however, as was apparent in the Nexen/CNOOC deal, Canada is less than willing to let China take controlling interests in the country's domestic oil and natural gas industry.

Not only is China investing in Iran's oil infrastructure, they are also shipping much-needed gasoline to Iran, supplying up to one-third of its imports in September 2009.  By August 2010, China's supplies of gasoline to Iran reached nearly one-half of Iran's imports; these exports were sold through various Chinese state-owned enterprises.  Even in the face of sanctions, in early 2012, China was still exporting gasoline to Iran.

With that as background information, what has China done to assist Iran in its nuclear quest?  While China appears to have cancelled plans to sell nuclear reactors to Iran in 1995 as I noted above, Chinese technicians built a calutron or electromagnetic isotope separation system for enriching uranium at the Karaj nuclear research facility.  In 1995, China had also planned to sell Iran a facility that would have allowed Iran to convert uranium ore into uranium hexafluoride gas which could be enriched to weapons-grade material, however the plan was cancelled because Iran could not pay for the system and because of concerns expressed by Israel.  Nonetheless, China did provide Iran with the blueprints necessary to build the facility.  In 1998, China had negotiated an agreement with Iran's Isfahan Nuclear Research Center to provide a lifetime supply of hundreds of tons of anhydrous hydrogen fluoride which could be used to produce the same uranium hexafluoride gas as noted above.  Anhydrous hydrogen fluoride is also a precursor for the chemical weapons agent Sarin.  When Washington protested against this plan by China, it was scuttled.

While not directly related to Iran's nuclear program, in the period between mid-1994 and mid-1995, China supplied dozens to hundreds of missile guidance systems and computerized machine tools to Iran to assist with development of its domestic ballistic missile system.  This delivery assisted Iran in the production of its Shahab-3 and Shahab-4 medium range ballistic missile systems with a range of up to 2000 kilometres as shown here:

In 2003, China supplied Iran with 1.8 metric tons of natural uranium and in May 2006, it was revealed that Iran had used uranium hexafluoride gas supplied by China to accelerate their uranium enrichment program.  In some cases, the Chinese entities involved in these programs are doing so without the knowledge of the Chinese central government.  In 2007, Chinese companies supplied Iran with materials for its nuclear program including graphite, tungsten copper, tungsten powder, high-strength aluminum alloys and maraging steel.  In 2010, it was reported by the IAEA that a China-based company supplied valves and vacuum gauges manufactured in France that could be used in Iran's nuclear enrichment program.

China repeatedly maintains that it is opposed to unilateral sanctions against Iran because it has economic ties (another word for energy deals) that are separate from Iran's nuclear program.  Other countries disagree; U.N. Security Council Resolution 1929 notes that there is a strong link between Iran's revenues derived from its oil and gas sector and the funding of its domestic nuclear activities.  In 2006, China hosted a summit of the Shanghai Cooperation Organization where President Hu Jintao remarked to Iran's President Ahmadinejad that Iran had a right to nuclear energy.  Again in September 2008, at a meeting between the same two gentlemen, China's President reiterated his support for Iran's right to peaceful use of nuclear energy.

On June 9, 2010, after much arm-twisting, China voted in favour of the aforementioned UNSC Resolution 1929 that noted the connection between Iran's energy-sourced revenues and the funding of its nuclear program.  Among the sanctions in this resolution is a call for all signatories to prevent the direct or indirect supply of major weapons to Iran as shown here:

"...and that all States should prevent the transfer to Iran of any tanks, armoured combat vehicles, large-calibre artillery systems, attack helicopters, or missiles and related systems or parts."

Incidentally, Resolution 1929 is the fourth round of sanctions against Iran.  Apparently, observations would tell just about anyone that sanctions are not working as they are intended.

Despite the United Nations Security Council's best efforts, China seems determined in its efforts to secure its energy future.  With Iran having the world's second largest natural gas reserves after Russia, all that the UNSC sanctions have done thus far is to open the door for China to step in where other nations refuse to tread.  Time and time again, China has proven that it doesn't hesitate to deal with the pariah nations of the world and Iran is no exception.