China’s Persian Gulf Diplomacy Reflects Delicate Balancing Act

The diplomatic acrobatics and brinkmanship on display over Iran’s nuclear program are escalating tensions in the Persian Gulf to new heights, raising the stakes for all of the protagonists involved—including China. In this context, it is worth examining China’s position on the rapidly evolving events in the Persian Gulf. The marked expansion of Chinese diplomatic, energy and economic interests in the strategically important Persian Gulf represents one of the most important geopolitical trends of recent years. In accordance with its traditionally pragmatic, middle-of-the-road approach to international affairs, China has cultivated friendly relationships with the array of hostile rivals competing for influence and primacy in the region. As a result, China has been thrust into the mix of diplomacy and tensions surrounding the dispute over Iran’s nuclear program. It should be no surprise, therefore, that China’s stance on Iran was a topic of great interest during Chinese premier Wen Jiabao’s recent six-day visit to Saudi Arabia, the United Arab Emirates (UAE) and Qatar from January 14-19, the first major foreign trip undertaken by Chinese leaders in 2012 (Xinhua, January 20).  

Entering the Fray

Before delving further into the implications of Wen’s recent visit to the Persian Gulf, the atmospherics surrounding the tensions over Iran’s nuclear program are vital for context. The United States continues to ramp up pressure on Iran over the purported nature of its nuclear ambitions by imposing a new and particularly aggressive package of economic sanctions. The latest iteration of economic sanctions to hit Iran targets its energy sector and all monetary transactions involving the Central Bank of Iran (Al-Jazeera [Doha], February 6). Washington also has succeeded in enlisting the support of the European Union (EU) to further stifle the Iranian economy; the EU implemented its own ban on the import, purchase and delivery of Iranian oil beginning July 1 (Financial Times [London], January 23) [1]. EU sanctions will cause Iran to lose approximately 20 percent of its foreign oil sales (Economist [London], January 21). Iran’s regional rivals also are assisting in punishing the Islamic Republic. Israel, the region’s only nuclear-armed power, is threatening to bomb Iran. The Persian Gulf monarchies led by Saudi Arabia readily broadcast their concerns about the prospects of a nuclear-armed Iran and Tehran’s posture in the region. To ease fears in global energy markets about how the latest sanctions will impact oil prices and consumer countries heavily reliant on oil imports from Iran, Saudi Arabia—the world’s top oil exporter—along with its Gulf Cooperation Council (GCC) partners has committed to raising oil production to compensate for supply gaps stemming from the removal of Iranian oil from international markets (Al-Arabiya [Dubai], January 16).  

Iran has remained defiant in the face of this relentless pressure by threatening to play its trump card: disrupting the Strait of Hormuz (National [Abu Dhabi], December 29, 2011). Over 35 percent of the world’s seaborne shipments of oil and around 20 percent of the world’s overall oil production pass through the strait every day. Tehran has threatened its neighbors against filling any supply gaps in the global oil supply after the latest round of sanctions go into effect or allowing for their respective territories to be used to launch attacks against Iran (Al-Arabiya, January 16; Fars News Agency [Tehran], February 5). To preempt the EU’s embargo against its oil beginning in July, Iran also has threatened to cut off oil exports immediately to certain EU member states (Press TV [Tehran], February 7).

On the surface, the underlying thrust behind Wen’s visit to three of the frontline Persian Gulf states ringing Iran was to discuss an array of political, energy, economic and cultural issues. Wen’s visit marked the first by a Chinese premier to Saudi Arabia in over two decades and the first visit ever by a Chinese premier to the UAE and Qatar. His itinerary included meetings with all three heads of state. Additionally, Wen met with the heads of the GCC and the Organization of the Islamic Conference (OIC). Wen also was present at the World Future Energy Summit and the fourth annual China-Arab States Cooperation Forum. Indeed, Wen and his counterparts concluded numerous agreements governing a range of issues, further solidifying the already strong relationships nurtured between China and all three countries over the years (Ministry of Foreign Affairs, January 20; also see “Bloc Politics in the Persian Gulf: China’s Multilateral Engagement with the Gulf Cooperation Council,” China Brief, September 24, 2010). Yet it was the Iranian question that colored the priorities and outcomes of the meetings. China has a critical stake in Iran and counts the Islamic Republic as a strategic partner. Consequently, China remains one of Iran’s most important defenders on the international stage. At the same time, China has worked hard to elevate its ties with Saudi Arabia, the UAE and Qatar—three of Iran’s regional opponents—specifically in the energy sphere. These dynamics are forcing Beijing to navigate a fine line between the competing rivals to ensure that its interests are protected, whatever the outcome of the current tensions.

Defining the Sino-Iranian Strategic Partnership

China’s quest to satisfy its growing demand for energy has served as the initial impetus underlying the Sino-Iranian strategic partnership. China, the world’s second-largest oil consumer and third-largest importer of crude, depends heavily on Iranian oil imports. This is the case even as Beijing has reduced its imports of Iranian oil in recent months over a series of pricing disputes with Tehran (Wall Street Journal, February 8). Iran is China’s third-largest supplier of imported oil; Iranian oil accounts for approximately 10 percent of China’s imported crude (Reuters, February 6). China is also Iran’s top purchaser of crude and biggest trade partner (Al-Jazeera, February 1). China also has a growing interest in Iranian natural gas. While Western companies have abandoned the Iranian energy sector due to the imposition of harsh economic sanctions against Tehran over the years, Chinese state-owned companies have inked upstream and downstream energy agreements dealing with oil, natural gas, refining and petrochemicals valued at over $40 billion (Zawya [Dubai], February 7; Press TV, July 31, 2010).

At the same time, China’s interests in Iran transcend energy. In principle, China is strongly opposed to U.S. and international moves to sanction Iran, especially efforts that target Iran’s energy and banking sectors. In accordance with its philosophy of advocating for non-interference in other nations’ domestic affairs, China supports Iran’s right to peaceful nuclear technology and insists on resolving any disputes over it through negotiations. Yet China also is opposed to any possibility that Iran develops nuclear arms. During his recent visit to Doha, Wen declared “China adamantly opposes Iran developing and possessing nuclear weapons” (Al-Jazeera, February 1). China’s status as a permanent member of the United Nations Security Council (UNSC) affords it with significant leverage when it comes to fending off U.S.-led international efforts to isolate Iran. China’s principled stance in defense of Iran’s right to pursue its nuclear program in the face of a U.S.-directed campaign against it is also viewed in Beijing as a gauge of Chinese credibility. China is keen to show its allies and rivals alike that it is loyal and prepared to stand by its commitments, even in the face of U.S. pressure. The Sino-Iranian relationship also affords Beijing with important diplomatic leverage over Washington, the still preeminent diplomatic and military power in the Middle East. China’s support for Iran serves as a check against Washington in response to the U.S. military presence in East Asia and its constellation of allies and partners surrounding Chinese territory.

Expanding Horizons    

China’s insatiable demand for energy in recent years has prompted Beijing to expand its network of energy suppliers in the Middle East and beyond. While Iran remains an important source of oil, Saudi Arabia, the world’s largest oil producer, is currently China’s top source of imported oil. By the end of 2009, China overtook the United States as the top importer of Saudi oil (“Shifting Sands in the Gulf: The Iran Calculus in China-Saudi Arabia Relations,” China Brief, May 13, 2010). Saudi Arabia sold China 1.12 million barrels per day (bpd) in December 2011, the fourth highest amount on record and a figure that represents over 20 percent of China’s imported crude (Al-Jazeera, February 1; Reuters, January 21). Herein lies the significance of the timing of Wen’s visit to the Persian Gulf during this period. As China remains steadfast in its support for Iran, Beijing also is determined to ensure that its access to the region’s vital energy resources is secure in the event of a prolonged disruption of Iranian or other regional oil exports due to any crises that may arise.

The complexity of the current circumstances facing China presents Beijing with a difficult contradiction. On the one hand, China continues to benefit greatly from the multifaceted relationship with Iran. The current state of geopolitics suggests the enduring aspects of the Sino-Iranian partnership will remain an important pillar of Chinese foreign policy in the Middle East. On the other hand, the reality of China’s growing energy needs has alerted Beijing to the importance of securing stable alternative supplies of energy. China also may be concerned about the ramifications of the latest U.S. sanctions applied to Iran, prompting it to seek ways to further decrease its reliance on imports of Iranian oil to satisfy Washington. In a sign of things to come, the United States sanctioned China’s Zhuhai Zhenrong Company in January for doing business with the Iranian oil sector (Al-Jazeera, January 16). While China appears resolute on how it chooses to engage with Iran, Beijing also seems to be taking a pragmatic approach to account for future crises that may arise over its dealings with Iran.

China probably is hedging to mitigate any risk to potential losses it would incur in an extreme set of circumstances that would see it shift course on its overarching policy toward Iran. China’s unyielding position over its dispute with Iran over Tehran’s oil pricing policies may indicate a shift in Beijing’s position on Iran may not be out of the question down the line, although a break between China and Iran of such magnitude is highly unlikely. India, a rival of China and the second largest purchaser of Iranian oil, has exploited the current rift between Tehran and Beijing to increase substantially its imports of crude from Iran, effectively scooping up China’s share (Fars News Agency, February 9). To circumvent the restrictions hampering dealings with Iran’s central bank as a result of the U.S. sanctions, India and Iran have concluded an agreement that allows New Delhi to pay for 45 percent of its imports of Iranian oil in rupees. Both countries also have discussed other creative ways to ensure Iranian oil continues to flow to India, including a barter system whereby India trades critical commodities and products such as wheat or industrial goods in exchange for Iranian crude (Times of India [New Delhi], February 8). Japan and South Korea, the third and fourth largest purchasers of Iranian crude, have expressed deep reservations about the latest sanctions on Iran (Reuters, February 1). Considering Beijing’s mercantilist outlook, it is unlikely that China’s top leaders would stand by as regional rivals displace China’s favored position in Iran.

The timing of China’s outreach to Iran’s rivals in the Persian Gulf does not portend a dramatic shift in Beijing’s regional policy is in the offing. China is not about to abandon Iran. China, however, is acting to shore up its energy security in the event of a regional conflagration by diversifying its oil supply network. Consequently, China is becoming more entangled in the region’s rivalries. China claims to pursue a regional foreign policy that separates business and trade from politics. Yet the current stakes involved are such that China is being drawn into the larger regional competition pitting the Persian Gulf monarchies against Iran—a price Beijing appears willing to pay to secure its interests even at Iran’s expense. In addition to expressing China’s opposition to Iran’s potential acquisition of nuclear arms, Wen conveyed Beijing’s objection to Tehran’s threat to disrupt the Strait of Hormuz (Al-Jazeera, February 1). Notwithstanding China’s military and defense relations with Iran, Beijing also has agreed to assist Saudi Arabia in developing its own nuclear program (Wall Street Journal, January 16). Such a gesture on the part of China almost certainly was designed to serve as an act of political theater to please the Saudi royal family and its GCC partners and to place further pressure on Tehran. For its part, Riyadh may very well be operating under the assumption that the United States already has decided to accept the reality of a nuclear Iran. Paradoxically, such a scenario may eventually usher in a genuine rapprochement between Washington and Tehran in the long run—however unlikely such a scenario may seem at the moment—diminishing the relative influence and significance of Saudi Arabia, Israel and other U.S. allies in Washington’s strategic concept of the Middle East. In this regard, Saudi Arabia and its regional partners are looking to China to help shape events surrounding the Iranian question in their favor. By eliciting an agreement from China to help initiate its own nuclear program, ostensibly as a counter to Iran’s nuclear capability, Saudi Arabia is showing Washington, as well as Tehran, that it too can explore a variety of options to secure its interests.

Conclusion

The ebb and flow of diplomacy and crisis involving the Iranian nuclear question will continue to impact the course of events in the Persian Gulf in the foreseeable future. As China’s interests in the Persian Gulf continue to broaden in such a climate, Beijing will find it increasingly difficult to maintain its delicate balancing act between the myriad competing interests at play. The challenges confronting Chinese diplomacy in the Persian Gulf make it harder for Beijing to sustain its traditional middle-of-the road approach to engaging the region. Given the extent of regional tensions, a solid tilt by China toward one of either Iran or the Persian Gulf monarchies will affect that strategic landscape of the region. After all, China’s continued support for Iran on the international stage ensures that Tehran escapes further isolation. Likewise, a hypothetical tilt by Beijing toward Iran’s rivals at this juncture would represent a major convergence between China and the United States. In spite of China’s genuine interest in fostering its ties with the Persian Gulf monarchies, Beijing is not prepared to sacrifice Tehran and lose the leverage its relationship with Iran affords it over the United States.

Notes:

1. The EU’s decision to allow for the sales of Iranian oil to continue until July 1 was crafted to allow for EU member states heavily reliant on Iranian oil imports, including Greece, Italy, Spain—the three largest purchasers of Iranian oil among EU countries— to find alternative sources of supply.