PREVIEW-France's Sarkozy to discuss Iran, currencies in China

Mon Apr 26, 2010 6:01am EDT

* France's Sarkozy plans Chinese charm offensive

* Leaders to discuss Iran, currency reform, climate change

* France eyes nuclear, plane deals, but nothing on agenda

By Sophie Hardach

PARIS, April 26 (Reuters) - French Prime Minister Nicolas Sarkozy will look to bury past tensions with China and win its support in global issues from Iran's nuclear plan to monetary reform during a visit to Beijing this week. Accompanied by Economy Minister Christine Lagarde and other ministers, Sarkozy will present his ideas for a global currency system that relies less on the dollar, though officials do not expect him to talk specifically about the yuan.

Relations between France and China hit a low in 2008 when protesters disrupted the passage of the Olympic torch through Paris and Sarkozy met Tibet's spiritual leader, the Dalai Lama.

While Sarkozy may bring up the subject of human rights to placate voters at home, the focus will be on charming China, a key player in top diplomatic disputes as well as one of France's main rivals in Africa in its quest for raw materials.

Underlining the importance France places on China, the April 28-30 stay will be Sarkozy's fourth trip to China since his election in 2007, and his second full state visit.

His wife, Carla Bruni-Sarkozy, often skips his overseas voyages, but she will be by his side this week and together they will open France's pavilion at the World Expo in Shanghai.

Sarkozy will meet President Hu Jintao and Premier Wen Jiabao, with officials hoping the encounters will help along talks over a new round of United Nations sanctions against Iran.

China would like to water down the proposed punitive measures and the talks are progressing only slowly, Western diplomats and officials say. Iran is China's third-biggest crude oil supplier, after Saudi Arabia and Angola.

"It's out of the question that importers will be victims of any sanctions," said a source close to Sarkozy.

"If fuel was on the list, which isn't at all certain, then China would be compensated by oil-producing countries for any shortfall in Iranian supplies."

CURRENCY OVERHAUL?

Sarkozy also plans to use the opportunity to explain his proposal for diversifying the global monetary system to reflect a more complex world -- an idea he wants to make a major subject of the G8 and G20 summits hosted by France next year.

China has shown interest in an overhaul, challenging the dollar's status as the world's favoured currency.

"We are not going to address the question in terms of specific currencies -- the yuan relative to the dollar or the euro -- but in a broader way," said a presidential adviser.

"It's about discussing whether in the 21st century, we might think about the outlines of an international monetary system that's more in line with today's global economic situation."

French officials said the yuan, for example, was gaining more and more clout as a currency.

While France hopes to benefit from the rise of China both in politics and business, the fact that Chinese manufacturers are now increasingly developing and selling their own technology has made the market tougher for French planes and power plants.

In past visits, Sarkozy struck deals for two nuclear reactors for a plant in Taishan, as well as 160 orders for Airbus planes. No major deals are expected this time.

"One of the big questions of this trip is to find out whether France can resume its big-contract diplomacy," said Francois Godement, a China specialist at the Institute of Political Science in Paris.

"Little by little, France's big businesses are hunted out of their niches in China," he said. "How many trains are we going to sell to China, when it is selling its own high-speed train as far afield as California and Saudi Arabia?" (Additional reporting by Emmanuel Jarry; editing by Myra MacDonald)

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