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China signs $10bn of deals with Iran petrochemicals firms

Beijing has signed US$10 billion (Dh36.73bn) of contracts for oil refining, petrochemicals and pipeline projects in Iran and has expressed interest in helping to build seven refineries, the Iranian deputy oil minister says.

Beijing has signed US$10 billion (Dh36.73bn) of contracts for oil refining, petrochemicals and pipeline projects in Iran and has expressed interest in helping to build seven refineries, the Iranian deputy oil minister says. The developments would help Iran to refurbish and expand its dilapidated refining sector, enabling it to become self-sufficient in petroleum products such as petrol and diesel.

That has been one of Tehran's long-standing goals as it grapples with sanctions over its nuclear programme. Earlier this year, the government announced plans to privatise Iran's refineries but most potential investors have been reluctant to step forward. In time, Chinese refinery investments would blunt the effects of new US and EU sanctions aimed at squeezing Iran's fuel supplies. But for now, Beijing appears to be co-operating with some of the economic measures that western powers are seeking to use to force Tehran to negotiate over uranium enrichment.

Tehran's oil exports to China of 66.12 million barrels, or 181,000 barrels per day (bpd), in the first half of this year were 30 per cent lower than in the same period last year, said Hossein Nogrehkar-Shirazi, the deputy minister. His data confirmed analysts' estimates. "Although Iran is still among [the] top 10 oil exporters to China, it is the only country which in the first six months of 2010 has seen its exports to China falling," Mr Nogrehkar-Shirazi added.

Last year, Iran was the third-largest crude oil supplier to China, exporting about 460,000 bpd to the world's most populous country. For the first time, China overtook Japan as the top buyer of Iranian crude. Those purchases are now falling even as China becomes more dependent on imported oil to meet its surging demand for transport fuel and fill new storage tanks. Customs data show Beijing's June imports of crude increased 34 per cent to a record 5.44 million bpd from a year earlier.

But Beijing may be shunning Iran's sticky, sulphurous oil simply because the market is well supplied with other attractively priced crudes that need less refining, rather than for political reasons. In April, traders cited uncompetitive prices as the reason China cut imports of Iranian fuel oil, one of the few refined petroleum products Iran exports in any quantity. China has been the most reluctant of the world powers to implement sanctions against Iran.

On Friday, the Chinese foreign ministry said it opposed sanctions the EU announced last week. It urged dialogue and diplomacy to resolve the Iranian nuclear controversy. "China disapproves of the unilateral sanctions put in place by the EU against Iran," said Jiang Yu, a ministry spokeswoman. The previous day, US officials said they would travel to China, Japan, South Korea and the UAE to demand compliance with new UN Security Council measures against Iran, which western governments suspect of seeking to develop nuclear weapons. Iran denies such allegations.

Last year, China became Iran's most important trade partner, with $21.2bn of bilateral trade, up 47 per cent from 2006. Western sanctions against Iran have helped drive the trend. Chinese direct investment in Iran's upstream oil and gas sector has reached $29bn, Mr Nogrehkar-Shirazi said on Saturday. But analysts say China's involvement in Iranian oil and gas development projects has so far done little to boost output capacity.

Nor has it helped Iran acquire coveted technology for gas liquefaction, which would enable the country to develop exports from South Pars, its side of the world's biggest gasfield. Qatar's exploitation of the same deposit, which it calls North Field, has fuelled the emirate's emergence as the leading global exporter of liquefied natural gas. @Email:tcarlisle@thenational.ae

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