Obama Phones Hu over Iran Sanctions; China Stresses Peaceful Resolution; India Reviving Iran Pipeline Plan

As part of his press for increased sanctions on Iran over its civilian nuclear enrichment program, President Barack Obama called Chinese President Hu Jintao on Thursday. The US has few bargaining chips to induce China to play ball on Iran, which supplies 8% of China's imported petroleum. (For the importance of Iran to the Chinese economy see this Reuters article.) For China's energy needs in general, see Michael Klare at Tomdispatch.

One issue that has caused tensions between Washington and Beijing is US pressure on Beijing to revalue its currency, which economists consider undervalued. Artificially keeping the yuan low helps China's manufacturers to export their goods more readily, and hurts the manufactures of other countries (such as the US itself) that let their currencies float and be assigned a value by the market.

It may be that Obama will let the Chinese revaluation issue slide in order to get better cooperation on increased sanctions. If so, it would be a bad deal. Reviving US industries through more competitive exports is light years more important than ratcheting up sanctions on Iran, especially since the kind of sanctions that can likely get through the Security Council will be powerless to deter Iran's nuclear enrichment program.

Even then, China will not want measures that hurt Iran's ability to export oil and gas. China is now the world's second largest importer of petroleum, at about 4 to 4.8 mn. barrels a day. (The US is importing about 11 million b/d, though its appetite has decreased in the past 18 months because of the deep recession.) China desperately needs energy from Iran if it is to go on growing, and Beijing is highly unlikely to anything to harm that supply.

Meanwhile, a key player with regard to Iran will be missing at the UN Security Council talks, i.e. India. New Delhi just yesterday broached reviving a plan to bring natural gas from Iran through Pakistan and thence to India. The $8 billion plan has been in limbo for two or three years. First, the US pressured the Asian Development Bank not to underwrite the project, raising the question of where the $8 bn. will come from. Then, there were ethnic disturbances by Baluch tribesmen in the area through which the pipeline would run, raising questions about how secure it would be (a question you would want answered before sinking $8 bn. into it) Finally, Iran asked for an unrealistically high price for the natural gas.

But Pakistan is pledging to ensure security for the pipeline. The Pakistani military has shown in Swat and South Waziristan that it can do counter-insurgency if it is willing to invest enough manpower and equipment, which may make its pledge about Baluchistan more credible to India. As for prices, the coming on line in the past five years of shale gas in the US works to keep them relatively low. Shale gas is profitable to extract at about $4 per million British Thermal Units, ensuring that when the price rises sufficiently, the increased US production from shale will force it right back down, for the foreseeable future. The US has now reemerged as the world's largest producer of natural gas, ahead of Russia. This introduction of new shale production will have disciplined Iran's expectations, perhaps making it more likely that Tehran will offer India a realistic price. (Natural gas has the advantage of producing far less carbon dioxide than coal. It has the disadvantage of being extracted through methods that use a lot of water and potentially disturb the environment; also, the extraction process could release methane gas, which is several times worse as a greenhouse gas than carbon dioxide.)

The United States immediately urged Pakistan to shelve the project, saying it is "not the right time" for it. Neither Pakistan nor India is likely to yield to Washington on this issue. India cannot directly intervene in the UNSC discussions of tightened sanctions on Iran, but it can work through friendly countries such as the Russian Federation to make its concerns known. And, if the choice is being energy-starved, it may at some point just break the US sanctions regime and take the consequences.

The USG Open Source Center translated the following report from Chinese; it underlines that China still hopes for a negotiated settlement and certainly disapproves of the use of force. Are we getting to a point where China might over-rule Israel in the Middle East?

PRC FM spokesman: China 'Remains Committed' to Peaceful Solution of Iran Nuke
By reporters Tan Jingjing and Hou Lijun: "Qin Gang Says China Continues To Remain Committed to a Peaceful Settlement of the Iran Nuclear Issue"
Xinhua Domestic Service
Thursday, April 1, 2010 . . .
Document Type: OSC Translated Text . . .

Beijing, 1 Apr (Xinhua) -- Chinese Foreign Ministry spokesman Qin Gang reiterated at a regular news conference on 1 April that the Chinese side will continue to remain committed to finding a peaceful solution to the Iran nuclear issue.

In response to a question on the Iran nuclear issue, Foreign Ministry spokesman Qin Gang confirmed that Iranian Supreme National Security Council Secretary Jalili arrived in China on 1 April for a visit, during which State Councilor Dai Bingguo and Foreign Minister Yang Jiechi will separately meet and hold talks with him.

Qin Gang said: On the night of 31 March Beijing time, the general directors of the foreign ministries' political departments of China, Russia, the United States, Britain, France, and Germany held a teleconference to exchange views on the Iran nuclear issue. They agreed to continue to maintain contacts through various channels.

Qin Gang said: The Chinese side is highly concerned about the situation currently facing the Iran nuclear issue and is stepping up efforts to conduct communications with the relevant parties to push for an appropriate solution to the nuclear issue and strive for results. The Chinese side will continue to make constructive efforts for a diplomatic settlement of the Iran nuclear issue.

He reiterated: On the Iran nuclear issue, the Chinese side stands for safeguarding the international nuclear nonproliferation system and also safeguarding regional peace, security, and stability. When discussing this issue, the Chinese side always proceeds from these two points.

(Description of Source: Beijing Xinhua Domestic Service in Chinese -- China's official news service (New China News Agency))

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