BEIJING // The United Nations may have imposed a fourth round of sanctions on Iran, but it seems unlikely to deter companies from China - a permanent member of the UN Security Council that voted in favour of the measures - from strengthening their links with the Islamic republic. Indeed the international effort to isolate Iran is a multibillion-dollar opportunity for Chinese firms, as their rivals from nations more wary of President Mahmoud Ahmedinejad's regime sever ties.
Links between Iran and China centre on energy, through China's requirement for Iranian oil, and Iran's need for foreign expertise to develop its vast, but heavily underutilised, reserves. Iran also requires petrol from Chinese petroleum companies as its own supplies remain inadequate. China has ensured that the UN sanctions passed have not affected its hydrocarbon trade with Iran. "Iran has become the engineer of China's economic growth. It may not be like Saudi Arabia is to the US economy, but it's close," Ilan Berman, vice president of the American Foreign Policy Council, told the Washington Post.
Mr Berman made those comments in 2007, but they are now more relevant than ever as a string of major deals have deepened the interdependence of Iran and China. Among the foreign firms to have recently stepped back from Iran is Malaysia's Petronas, which has ceased supplies of petrol, although the company said this was simply because there was no longer a requirement for it. Russia's Lukoil and the Anglo-Dutch group Royal Dutch Shell have done likewise.
The Beijing-based Sinopec has been happy to take their place. In April it was revealed the company was sending a one-time shipment of 200,000 barrels of gasoline to Iran, while reports indicated that this month the company was sending a further 600,000 barrels. Sinopec did not respond to a request for confirmation of the shipments. According to one Beijing oil industry analyst, who asked not to be named, several reasons deter non-Chinese companies from doing business with Iran.
"I think there are a couple of reasons outside the sanctions. It's not a stable government or country. You're not sure what the Iranian government is going to do if you're working there," she said. "I [also] see a lot of trading companies saying they don't want to supply Iran now. For them it's a question of image and what public pressure they're under." For the likes of Sinopec and Petrochina, another firm with strong ties to Iran, these considerations are secondary. Under the ownership and control of the Chinese government, their main objective is to secure energy supplies.
"They have a very different approach to buying and selling and overseas acquisitions, and they have a very different perception of risk. There's not the public pressure within China to pull out of Iran," the analyst said. Iran will become "more and more dependent" on Chinese companies to develop its gas fields. The Islamic republic has the second-largest natural gas reserves behind Russia, but to date development of them has been so slow - partly a result of sanctions - that the country must import gas.
"Iran just doesn't seem to have the technical capability nor the finance [to develop its gas fields]," the analyst added. "It needs a secondary player with both money and the technical expertise." In June last year, the China National Petroleum Corporation secured a US$4.7 billion (Dh17.3bn) deal to develop part of the South Pars gas field. In doing so, it replaced the French company Total as the main contractor after it dithered amid the growing controversy surrounding Iran.
The field is, according to Iranian officials, due to produce an income of as much as $130bn per year, and it will further help China to secure its energy supplies. CNPC's agreement to develop the field was reached with the National Iranian Oil Company, which had opened an office in Beijing a few months before the deal was signed. Only last month Iran placed an order with China for six liquid natural gas tankers, each worth between $200m and $220m, to export liquified natural gas from its territory.
The only thing that would deter the Chinese from further deepening their ties with Iran, commentators have suggested, is the possibility of an Israeli strike against the Islamic republic. Iran is the third-biggest supplier of crude oil to China, and also exports machinery and carpets to the world's most populous nation. "In general I think China's dependence on the Middle East is growing," the analyst added. "You see refineries here upgrading so they can handle more Middle East crudes I see more and more volumes coming from there."
However, Dong Lisheng, a political analyst at the Chinese Academy of Social Sciences, said China had diversified its energy supplies through links with Latin America and Africa. Bilateral trade between Iran and China, worth $27bn last year, is set to grow to $50bn by 2015, according to the Iran-China Joint Chamber of Commerce. China has become the top supplier of heavy machinery to Iran, taking the place of Germany, and has been heavily involved in building and supplying rolling stock for the Tehran metro.
At the start of this year, the Beijing-based engineering company Norinco International Cooperation exported 14 locomotives to Iran, 18 months after agreeing to supply electric locomotives valued at $500m for the Tehran subway. Norinco declined to speak to The National about the deal. It was also reported last month in Iran that China had provided a $1.2bn loan to fund infrastructure projects in the capital.