x Abu Dhabi, UAE Friday 21 July 2017

China keen for upturn as commerce with Iran takes a tumble

China is Iran's biggest trading partner, purchasing up to a fifth of Iran's oil exports annually.

A shop in Tehran sells prayer beads imported from China. Newsha Tavakolian / The National
A shop in Tehran sells prayer beads imported from China. Newsha Tavakolian / The National

China is Iran's biggest trading partner, purchasing up to a fifth of Iran's oil exports annually.

As Iranian elections take place on Friday, companies in the world's second-largest economy, and Beijing, will be hoping for a change of tack from Tehran's new leader.

The value of trade between the two countries is falling because of sanctions imposed by the UN. Slowing economic growth in China is also hitting demand for oil from Iran. The restrictions programme is led by the United States and Washington insists the embargoes are focused on Iran's nuclear and missile programmes. The sanctions have imposed asset freezes and travel bans on individuals and firms linked to them, including banks that provide financing.

Because of sanctions, the value of China-Iran trade has fallen from US$45 billion in 2011 to $37bn last year, Asadollah Asgaroladi, the chairman of the Iran-China Chamber of Commerce, was quoted as saying in Caixin magazine.

China still invested $600 million in Iran last year, but levels have been hit by slowing growth.

First-quarter GDP in China grew by 7.7 per cent, a lower than expected figure, which has moderated oil demand. In July, the US president Barack Obama named China's Bank of Kunlun alongside the Elaf Islamic Bank in Iraq among lenders that "facilitated transactions worth millions of dollars" for Iranian lenders already under sanctions.

In February, the US announced a set of new sanctions on a Chinese businessman and several companies for selling banned merchandise to Iran.

The notice was published on the Federal Register, and was the third time since 2006 that Li Fangwei, also known as Karl Lee, incurred US penalties for supplying material that the US believes is being used to support Iran's nuclear missile development programme. The notice said Mr Li and a firm called Dalian Sunny Industries "engaged in missile technology proliferation activities that require the imposition of missile sanctions" under the US Arms Control Act and the Export Administration Act.

And a separate sanction notice named Mr Li, Dalian Sunny and three other Chinese firms, including the major Chinese arms producer Poly Technologies, BST Technology and Trade Company and China Precision Machinery Import and Export Corporation, as being sanctioned for violations of the Iran, North Korea, and Syria Nonproliferation Act.

"We have never helped any countries or regions develop any banned weapons, nor have we exported or promised to export weapons or technologies to any countries or regions that are under United Nations security council resolutions sanctions," Poly Technologies said. "We hereby demand the US side to respect the fact and immediately lift the sanctions," said Poly, which has close links to the Chinese military.

Restricting trade with Iran has put China in an awkward diplomatic position as it traditionally tries to avoid the sanctions route when dealing with its energy providers and allies.

China prioritises energy security above most diplomatic considerations and it is crucial to understand Beijing's need for Iranian oil when trying to fathom its less than enthusiastic response to US sanctions over Tehran's nuclear ambitions. Beijing lucrative links with Tehran.

China is a veto-wielding member of the UN security council. For a long time, it vetoed sanctions on its ally North Korea, which is also building nuclear capabilities despite international opposition, although Beijing has taken a tougher line on Pyongyang since North Korea surprised its neighbour with its latest nuclear missile test in February.

In March, China's deputy permanent representative to the UN, Wang Min, reiterated Beijing's opposition to the US-led sanctions on Iran.

"China is always firmly against use or threat of use of force. We are not in favour of putting excessive pressure or new sanctions against Iran," he told a security council meeting.

"China is firmly opposed to the unilateral sanctions took by some countries, which expanded the range of sanctions and damaged the interests and legitimate rights of other countries," he said.

The key phrase is "interests and legitimate rights of other countries".

"All parties concerned should strengthen contacts with stronger confidence, show their flexibility and sincerity to promote the dialogue process, to create the conditions for reaching a comprehensive, long-term and proper solution to the Iranian nuclear issue," Mr Wang said.

 

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