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Oil-Thirsty China Strives For Persian Petroleum

Shirzad Azad - 1/4/2007

Iran is endowed with abundant crude oil and natural gas reserves, and perhaps being equipped with nuclear weapons is only a tool to protect its most in-demand asset. Shall we trust Tehran?

Contemporary history shows that the Persian nation has paid a huge price for its petroleum and the idea of a powerful and independent Iran might be a wishful thinking as long as Middle East oil continues to be the lifeblood of the world economy and the focal point of American foreign policy in the region.

The rise of oil-thirsty China, followed by India, has become a new headache to the Middle East, turning the region into a battleground of rivalry among great powers. It is petroleum that is determining the importance of the Near East in the calculations of all big powers. After all, the whole point of the US invasion and occupation of Iraq was to establish a long-term military presence in the country to ensure American domination of the Mideast and its prized oil reserves as leverage over other economic competitors and potential strategic challengers.

Since 1993, China has been a net importer of oil and as its economy develops, demand for oil and gas is certain to increase by large margins. In the long-term, there will be no other substantial inflow of petroleum to the world’s second biggest oil consumer, China, comparable to flows from the Middle East. When the supply of energy from other parts of the globe rapidly diminishes, the rivalry of the greatest consumers of oil will aggressively intensify.

Based on some estimates, almost every second barrel of crude oil that leaves the Persian Strait of Hormuz in 2010 will head to the Strait of Malacca to be used by the Asia-Pacific economies. China leads the region’s oil consumers, and in 2010 it will have to import 4 million barrels of oil per day; by 2025 China will be importing 9.4 million barrels.

Aside from Iran, nearly all the oil producers in the Persian Gulf area have close cooperation with the United States, and China’s growing thirst for oil has made it imperative for Beijing, using its special relationship with Tehran, to get closer to the Middle East. Because of its strategic, political and economic importance, the Near East occupies a unique place in international politics, and without having some stake in this region China would put its long-term prospects as a rising global power in a very vulnerable position.

Iran is the second largest oil producer globally, controlling about 9 percent of the world’s petroleum. China’s booming economy has turned it into the world's second greatest oil consumer and this has made Tehran a precious partner and a necessary ally for Beijing.

Holding the second rank among top exporters to Iran, China has become a major source of manufactured goods, leading to the bankruptcy of certain domestic industries of Iran. More importantly, growing Sino-Persian ties and their close partnership for energy resources have progressed to a new stage. Iran is now China’s second-largest source of imported oil after Saudi Arabia, and Tehran has replaced Japan with China as the No 1 importer of Persian petroleum.

Despite the emerging political and economic relationships between Tehran and Beijing, leading some Western analysts to warn of the consequences of an Islamic-Confucian alliance and an axis of non-Western civilizations, China has so far paid the least price for its commitments to Iran. Beijing is not willing to compromise its long-term interests for Tehran, and this makes Iranian officials more cautious about putting all their eggs in Chinese basket.

China can no longer sign lucrative contracts with Iran and when it comes to crucial moments, such as the nuclear issue, hide behind Russia, in order to keep the United States happy. China's hedging strategy may serve its short-term interests, but in the long-term it damages Tehran’s trust and makes China an unreliable partner.