AFP: China has emerged as Iran's top economic partner, investing heavily in the energy sector and filling the gaps left by Western firms forced out by international sanctions.
By Laurent Maillard
TEHRAN (AFP) — China has emerged as Iran's top economic partner, investing heavily in the energy sector and filling the gaps left by Western firms forced out by international sanctions.
In 2009, China became Iran's premier trade partner, with bilateral trade worth 21.2 billion dollars against 14.4 billion dollars three years earlier.
The figures confirm the exponential growth in commercial ties between the two countries, which were almost non-existent 15 years ago, when trade volumes amounted to just 400 million dollars.
According to official data, Western sanctions have opened the way for Chinese companies, which last year directly supplied Iran with 13 percent (7.9 billion dollars) of its imports.
Iranian estimates also suggest that an equivalent amount was imported indirectly through the United Arab Emirates in 2009.
The West is pressuring China, one of the five permanent members of the United Nations Security Council, to back further sanctions against Iran over its controversial nuclear programme.
But new sanctions could harm the Asian powerhouse's burgeoning economic ties with the Islamic republic and Beijing insists diplomacy is the best way to end the standoff.
British Foreign Secretary David Miliband is in China this week for talks in which Iran's nuclear programme and sanctions are certain to be raised.
Prior to China's ascendancy, Germany was Iran's largest importer for more than 20 years.
Now the growth in Sino-Iranian trade ties is expected to continue in 2010 with the recovery of the global economy, according to a European analyst.
Chinese companies are also making investments in a number of major projects in Iran, like the construction of a motorway linking Tehran and the Caspian Sea, via the Alborz mountains.
China is investing significantly in Iran's energy sector, although its oil purchases from the Islamic republic are a meagre 11.4 percent, far behind Angola and Saudi Arabia, which supply more than half of Beijing's crude imports.
With some 15 to 20 billion dollars worth of oil and gas contracts signed and an equivalent amount of new investments being negotiated, according to oil experts in Tehran, energy-hungry China has emerged as Iran's largest foreign investor.
"There is only Beijing which is still investing massively in Iran," said one expert, speaking on condition of anonymity.
"The political pressures, financial problems caused by the banking restrictions and the uncertain economic returns have discouraged companies like Total, Shell, ENI and Statoil from renewing their investments in Iran," he added.
"China, which does not have these constraints and is concerned with securing its long-term energy needs, has taken the lead since 2005."
Iranian Oil Minister Masoud Mirkazemi backs this arguments, saying Chinese leaders will not "allow others to intervene" when it comes to Beijing's ties with Tehran.
"We have good cooperation with China. I congratulate the Chinese leadership which is seeking its nation's interest and wants to have a secure source of energy," Mirkazemi told reporters on Monday.
China National Petroleum Corp, the country's largest oil firm, and its subsidiary Petrochina agreed last year to invest some eight to nine billion dollars in one gas and two oil projects in Iran.
The oil projects are in Khuzestan, in southwestern Iran, while the gas project is at the giant South Pars field in the Gulf, where the Chinese firms replaced France's Total.
Sinopec, China's largest oil refining company, has also been involved since 2007 in exploiting Khuzestan's Yadavaran oil field, which envisages an investment of nearly three billion dollars.
Britain's Financial Times said in a report this month that Chinese companies are now supplying one-third of Iranian imports of petroleum products following the withdrawal of major Western suppliers.
However, analysts say the development of Sino-Iranian relations could run up against serious obstacles.
"Tehran wants China to invest, but at the same time it is very protective of its own businesses," said Hatef Haeri, who runs Bedigest.com, an Iranian economic information service.
"So Chinese companies face real mistrust in Iran, and must also overcome big cultural and linguistics barriers."
For its part, Beijing could be reluctant to sacrifice other more important interests if Western pressure intensifies.
Zhu Weilie, head of the Middle East Studies Institute at Shanghai International Studies University, said Iran's trade influence with China was far outweighed by China's commercial ties to the West.
"The US certainly matters most to China in terms of interests," he said. "China has extremely big trade volumes with the US, Europe and Japan, while trading volumes between China and Iran are just 20 billion dollars a year."
Two-way trade between China and the United States totalled 409 billion dollars in 2009, according to the US Congressional Research Service.