US calls China’s bluff

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15 January 2012

The major geopolitical development this weekend has been the US decision to penalise a Chinese company – Zhuhai Zhenrong – for selling refined petroleum products to Iran in defiance of an embargo imposed to punish Iran for continuing to push ahead with its attempts to achieve nuclear independence.

According to a BBC website report, Chinese Foreign Ministry spokesman Liu Weimin said on 14 January 2012 that China expressed its “strong dissatisfaction” with and “adamant opposition” to the US decision.

“Imposing sanctions on a Chinese company based on a domestic (US) law is totally unreasonable and does not conform to the spirit or content of the UN Security Council resolutions about the Iran nuclear issue,” he added.

Washington has accused Zhuhai Zhenrong of being the largest supplier of refined petroleum products to Iran. It is said to be one of three international firms that will be punished for dealing with Iran. The other two are Singapore’s Kuo Oil and FAL Oil, an energy trader based in the United Arab Emirates.

According to the BBC report, the US State Department said that its sanctions on firms breaking the embargo prevent them from receiving US export licences, US Export-Import Bank financing or any loans of over $10m from US financial institutions.

The European Union has agreed to follow the US by freezing Iranian Central Bank assets and imposing its own embargo on oil imports from Iran. Japan, another close ally of Washington, has also said it will introduce an embargo.

Chinese Premier Wen Jiabao has been visiting Arab oil-producing nations, including Saudi Arabia, this weekend seeking alternative sources of supply amid fears of major disruption to Iranian oil exports as a result of the oil embargo. Iran is said to be China’s third largest supplier of oil, after Saudi Arabia and Angola.

Analysts said the sanctions against Zhuhai Zhenrong were largely symbolic, given that the company would be unlikely to do much business in the US.

It may be seen as more of a threat to larger Chinese energy companies, which have made big investments in the US energy sector.

“Mark Dubowitz, executive director of the Foundation for Defense of Democracies, is quoted by the BBC as saying: “This could be the beginning of a cascade of more sanctions on Chinese companies if China doesn’t curtail its Iranian trade.”


The big question is whether China will adopt tit-for-tat sanctions against US companies.

On the one hand, it is understandable that the US does not want US funding to be used for trade which breaks its embargo (regardless of whether the embargo is justified or not). 

On the other hand, it is equally understandable that China, which does not support the embargo, resents the US threat that Chinese business interests will suffer if – unlike America’s pliant Western allies – China does not fall in with Washington’s wishes.

China is now just about strong enough, economically and militarily, to defy US hardball tactics. If it believes that its sovereignty is being infringed by a US diktat that threatens its national interests, it will be more than ready to respond in kind.

Another possibility is that the US may be flying a kite.

If the Chinese reaction is hardline, it may be that the US will ratchet down its rhetoric and softpedal the sanctions, at least so far as China is concerned. For one thing, China is a massive investor in US government bonds and, for another, the degradation of the Chinese economy – currently “the workhouse of the world” –  as a result of a shortfall in oil supplies would have an incalculable impact on the world economy, including that of the United States.

“May you live in interesting times”, the Chinese sage Confucius is said to have advised. 

The year 2012 looks like being an interesting year for US-China relations.


This entry was posted in China, Europe, Iran, Japan, UN, USA. Bookmark the permalink.

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