return to ICG Spaces home    ICG Risk Blog    discussions    newsletters    login    

ICG Risk Blog - [ China and Russia achieve in Iran what the US and NATO had in Turkey ]

China and Russia achieve in Iran what the US and NATO had in Turkey


To geopolitically position Iran in the mid-21st century, think Turkey in the later-20th century. Just as Turkey anchored a US and NATO flank while projecting US forces and forward basing into Russia, the Caucasus, and the Middle East, so now will Iran anchor a Chinese, Russian, and SCO (Shanghai Cooperation Organization) flank while projecting Russian and Chinese interests into the Persian Gulf, SW Asia, and the Middle East. Think of Russian angst reversed, with the US on the receiving end this time unsupported by France and Germany as they seek to gain commercial and political capital as they too attempt to restrain the US "hyperpower."

Why we can't see this coming is utterly astonishing to me. One cannot grasp the flow of near-superpower political action without adding China and Russia to France's view that "Its sacred duty is to check American power by publicly and ostentatiously objecting to it from without. The French are so concerned by the dominance of American powermilitarily, economically, culturally, and technologicallythat a former French foreign minister felt the need to coin a new word to describe it: hyperpuissance, or "hyperpower." Think of it this way: France thinks the United States has so much power that the French language didn't have a word for it.

First, the money:

Middle East energy, and Saudi energy in particular, is no longer a US preserve. Sinopec (China Petrochemical Corp) signed a major gas exploration contract in Saudi Arabia's Rub Alkhali Basin in March 2004. (Russia's Lukoil and a consortium of Italy's ENI and Spain's Repsol YPF also gained exploration rights as the Saudis sought to diversify away from US oversight.)

Refinery-heavy Sinopec has always been keen to find oil and gas resources in foreign countries, as it imports more than 60 per cent of the crude it refines. Saudi Arabia is one of the most important countries where the company is considering to add to its upstream reserves.

While Exxon Mobil and other American companies remain active in Saudi Arabia's petrochemicals and refining industries, the demise of the earlier gas deal highlighted important differences between the Saudi government and American investors. Problems emerged over financial terms and Saudi requests for companies to operate power plants and desalinization projects as well as search for gas. The deal was also scrapped amid growing security concerns [as] Saudi Arabia's traditionally close ties to the [US] have come under increased scrutiny. "It is newsworthy that no U.S. companies have been successful in the tender and perhaps more significant that none of the successful bidders have a substantial current portfolio or recent track record in the Middle East."

China significantly extended its energy and political access into the Stans with the May 2004 agreement with Kazakhstan between China National Petroleum Corp (CNPC) and KazMunaiGaz to build an oil pipeline from Atasu, NW Kazakhstan, to China's NW Xinjiang province. Kazakhstan wants to both diversify away from Russia and become a major exporter, thus its continuing talks with China for a pipeline to connect Caspian Sea gas fields to the east.

That palled with the October 2004 agreement between Sinopec and Iran's National Iranian Oil Company to "buy 250 million tons of LNG over 30 years from Iran and develop the giant Yadavaran [oil] field" which may contain over three billion barrels of recoverable reserves with a total production capacity of 300,000 bpd.

Iran's effort to tie LNG purchases with oil field development is seen "as more beneficial for Sinopec than the traditional buyback contracts, which apply to most foreign development deals in Iran"… Iran's petroleum minister [has] urged Chinese oil firms to play a bigger role in developing the industry in his country… Collaboration with Beijing would bring Tehran a new source of skills and investment at a time when U.S. sanctions block U.S. oil companies from doing business with Iran. "We have invited Chinese companies ... to actively participate in our exploration and development projects [promising them] the greatest incentives," including tax exemptions.

China saw that it could step across a prior barrier, the Iran Libya Sanctions Act (ILSA), without significant US reprisal of penalties the act permits. While European and Asian firms had avidly sought Iranian energy contracts, notably Japan's INPEX's $2 billion 2004 agreement to develop the Azadegan field, China had previously limited itself to modest investments in Iran, including Sinopec's construction of an oil terminal and refinery upgrades.

It is supreme understatement to say that:

It is perhaps too early to digest fully the various economic, political and even geostrategic implications of this stunning development, widely considered a major blow to the Bush administration's economic sanctions on Iran and particularly on Iran's energy sector, notwithstanding the Iran-Libya Sanctions Act (ILSA) penalizing foreign companies daring to invest more than $20 million in Iran's oil and gas industry.

To be continued

Pressure on Iran could backfire
By Saloumeh Peyman
Asia Times
Nov 9, 2004

China rocks the geopolitical boat
Kaveh L Afrasiabi
Asia Times
Nov 6, 2004

So long US, hello China, India
By David Fullbrook
Asia Times
Nov 4, 2004

Gordon Housworth

InfoT Public  Risk Containment and Pricing Public  Strategic Risk Public  


  discuss this article

<<  |  May 2020  |  >>
view our rss feed