Defusing Iran

Sino-U.S. strategic interactions have played a critical role throughout the standoff over Iran’s nuclear program. In particular, China’s continued economic engagement with Iran, despite increasingly stringent U.S. sanctions, has led to tension. Yet the Obama administration’s characterization of its relationship with China on this issue remains predominantly positive. Speaking at Harvard last November, U.S. National Security Advisor Thomas E. Donilon’s claimed that the Chinese “have been a very good partner with respect to our Iranian policy,” noting that they “oppose the Iranian acquisition of nuclear weapons” just as the U.S. does. Indeed, despite a foreign minister’s insistence that it is “maintain[ing] normal energy and trade and economic cooperation” with Iran, China may in fact be reevaluating its approach to Iran in response to U.S. pressure.
China has a checkered history of involvement with the Iranian nuclear program. According to former International Atomic Energy Association Deputy Director General Olli Heinonen, China helped Iran develop its nuclear program through the 1990s and did not fulfill its responsibilities to report deliveries of reactors and enrichment systems to the IAEA. To this day, Chinese firms continue to be implicated in exporting relevant nuclear materials and missile technologies to Iran, as in a recently revealed smuggling operation through which Iran sought to buy magnets required for its centrifuges. In cases like these, it is “difficult to judge,” according to Heinonen, whether “the [Chinese] government just closes its eyes or the system is inefficient.” Regardless, existing export controls and oversight measures have been insufficient.
Feeling the Pressure
U.S. engagement with China over the last several years on the issue of Iran has produced promising results. Ambassador Nicholas Burns, formerly responsible for negotiations on Iran’s nuclear program at the State Department, noted that since 2005, China’s position has “evolved … in a more positive direction.” With the Iran nuclear standoff heightening, building international consensus on this issue has become a high priority for the Obama administration. President Obama has sought to strengthen the “pressure track” in order to increase the viability of the stalled “negotiating track,” as recounted by Ambassador Jeffrey Bader, former director for East Asian affairs on the National Security Council. Chinese cooperation was essential to building this pressure. In President Obama’s initial 2009 meeting with President Hu at the United Nations General Assembly, “the principal topic of discussion” was Iran, viewed as a security issue for both nations.
The Obama administration’s diplomatic efforts have particularly focused on shifting the lens through which China perceives the costs and benefits of supporting Iran. Indeed, according to Donilon, “a joint concern about security in the Persian Gulf [and] a joint concern about the price of oil” has been integral to Sino-U.S. cooperation under the Obama administration. In what was described at the time as a “special mission” to Beijing shortly after Obama’s visit in fall 2009, Ambassador Bader and fellow National Security Council official Dennis Ross sought to make China see the Iranian nuclear issue as a “major threat to international peace and stability,” given regional considerations. Shortly thereafter, China agreed to a U.S.-drafted statement condemning Iran to be presented to the IAEA board. China even supported Resolution 1929 in the Security Council, which imposed stronger sanctions against Iran’s nuclear program.
The Politics of Oil
Sino-Iranian relations have always been inextricably linked to energy security, a key element of China’s continued economic growth and thus political stability. In 2009, China became the world’s largest consumer of energy and second only to the United States as an importer of oil. The majority of China’s crude oil imports come from the Middle East, but there have been increasing efforts to diversify suppliers. Iran has consistently met approximately 10 percent of China’s crude oil needs, but, with sanctions tightening, this share has decreased.
In this respect, China’s national oil companies (NOCs) must be assessed as powerful actors with their own interests at stake. Sinopec is able to acquire oil from Iran at lower prices, a fact amplified by their monopoly on the Iranian market. Yet the decision calculus of the NOCs has become more complex, taking into account further considerations of long-term interests and opportunities. In some cases, these companies have forgone opportunities to buy Iranian oil at discounted prices in the hopes of pursuing investments in U.S. markets instead. Former CIA energy analyst Erica Downs believes that “the appeal of the U.S. market can be a source of leverage,” specifically since NOCs are increasingly sensitive to the role of public and Congressional opinion in determining whether investments are approved.
The recent investment trends underscore the success of American diplomatic efforts. Chinese companies have recently been hesitant to sign long-term contracts in Iran. The China National Petroleum Corporation (CNPC) repeatedly delayed beginning work in Iran’s South Pars gas field—despite warnings that an Iranian company would take its place—and now appears to have withdrawn entirely. Here too, do diplomatic and commercial elements intertwine. According to Ambassador Bader, at the time of the passage of Resolution 1929, the Obama administration emphasized in private conversations with top Chinese officials that “the single most important thing is no new energy investments.” Since then, Bader notes that the Chinese have cooperated, and the U.S. has largely refrained from imposing sanctions on major existing investments.
A Diplomatic Victory
As the trajectory of the Iranian nuclear crisis reaches a turning point, China’s role will continue to be decisive, as it has the unique potential to use its existing economic leverage and diplomatic ties to influence the regime’s behavior. China’s response to international pressures may also reveal China’s willingness to become a more cooperative, multilateral player on the international stage.
Ultimately, the Obama administration has been uniquely successful in sustaining previously unprecedented levels of Sino-U.S. cooperation on Iran through a nuanced and dynamic strategy, characterized by Bader as a “mixture of carrots and sticks.” The implicit economic incentives offered by opportunities to invest in U.S. markets have been particularly effective. Additionally, the use of pressure in the form of countersanctions has been deliberately confined to “signals” of primarily symbolic and limited economic impact, yet the boundaries set—as against new energy investments in Iran—have been sufficiently credible to be observed. As a result of the convergence between these efforts and its own strategic calculus, China has engaged cooperatively in both economic pressures and diplomatic efforts. China seems destined to become an ever more crucial player in U.S. efforts to curb Iran’s nuclear ambitions, without whose support little progress can be made on the issue.