UPDATE 1-Oil edges up as Saudis cut supplies to U.S., but global glut remains
* Saudi official says March supplies to U.S. cut by 300,000 bpd
(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON Feb 29 China is destined to play a decisive role in the effectiveness of sanctions against Iran, and the possibility of eventual military confrontation.
But the country's attitude towards nuclear enrichment and regime change has gone mostly unexamined by the western-dominated media and think-tanks.
Too many foreign policy analysts and commentators assume China's role is essentially passive - lending its de facto backing to sanctions to support shared aims of restraining Israel, avoiding the possible disruption of crude exports through the Strait of Hormuz, and averting nuclear proliferation and a destabilising arms race in the Middle East.
In reality, China's strategic goals in the Middle East are much more complicated. The limits to its willingness to support western policy have been made abundantly clear with the decision to veto a United Nations Security Council resolution on Syria.
For the government of Iran, no relationship is more important than that with China. China's approach will be critical to the impact of sanctions, the future of the nuclear programme and likelihood of regime change in the years ahead.
China's attitude towards sanctions and ultimate regime change is crucial for many reasons:
(1) China is Iran's largest single oil customer, while Iran is one of China's top-five crude suppliers. Bilateral oil flows are far more important strategically and economically than for the United States and most EU countries.
(2) China is the world's second-largest oil importer after the United States. But unlike the United States, which sources most of its imports from Canada, Latin America and West Africa, China sources almost half from countries in the Middle East and North Africa.
(3) Unlike the United States, China is becoming more, not less dependent on oil imports. U.S. import dependence has been falling as a result of ethanol blending, a more efficient vehicle fleet and new domestic resources such as the Bakken and Eagle Ford shales. In contrast, China has turned from being a net exporter in the 1990s to relying on imports to meet more than half of its requirements, and the percentage is growing.
(4) China is acutely conscious of its lack of domestic oil resources. Securing access to reliable supplies overseas is a top priority for its oil firms, backed by the full diplomatic and financial resources of the government.
(5) China is the only super-power besides the United States and is a veto-wielding permanent member of the United Nations Security Council.
(6) Beset by its own internal disputes in Tibet and Xinjiang, an unresolved conflict with Taiwan and the priority given to preserving internal social stability and the rule of the Communist Party, China remains a resolute supporter of the doctrine of non-intervention in the internal affairs of states and is deeply suspicious of humanitarian and liberal interventionism.
(7) China is one of the five declared nuclear weapons states that have signed the Nuclear Non-Proliferation Treaty. While it upholds the treaty's principles, its approach to proliferation of weapons and delivery systems is more complex than the three western weapons states, as its complex strategy with North Korea illustrates.
(8) China's government and military and large parts of its social and economic elite remain concerned about U.S. claims to political exceptionalism, ambitions for hegemony and willingness to accommodate China's "peaceful rise" rather than try to encircle and contain it by building a web of alliances with other countries in Asia and the Middle East.
From the perspective of Beijing, the tumult across the Middle East is beginning to look like a western-backed exercise in toppling governments and trying to replace them with new regimes that are more pro-western in outlook and give preferential access to energy supplies to western firms.
The initial uprisings in Tunisia and Egypt and fears of unrest in the Gulf monarchies appeared to be a major setback for U.S. and European interests in the region, which had been closely aligned with the status quo.
But senior policymakers in Washington, London and Paris have since embraced a strategy of selectively encouraging protests and regime change to remove enemies (Libya, Syria), while continuing to offer diplomatic support for crackdowns by incumbents in allied states (Bahrain).
It remains unclear whether the new governments that eventually emerge in Egypt, Tunisia, Syria, Libya and Yemen will be reliable western allies.
But when the West's ambition for regime change is coupled with U.S. alliances in the region (Bahrain, Qatar, Saudi Arabia, Kuwait, United Arab Emirates and Oman) and with its military presence in Iraq, the United States and its EU allies appear to be attempting to dominate a region accounting for one-third of global oil production and an even higher share of reserves.
Senior policymakers in Beijing may feel that toppling yet another government in Iran and replacing it with one more friendly towards the United States and the EU is not in China's interest.
RETURN OF "MR NYET"
For decades, USSR Foreign Minister Andrei Gromyko was given the nickname Mr Nyet ("Mr No") for his willingness to use Russia's Security Council veto. China, by contrast, has tended to play a much lower profile and has often been unwilling to use its veto, at least on its own. But there have recently been signs of greater assertiveness.
The temptation of western governments and liberal interventionists to stretch the terms of Security Council resolutions for their own ends has finally drawn a response.
Following the Security Council's authorisation of "all necessary means" in the first Gulf War, other Council members tightened the authorisation in the second Gulf War resolution to include what many thought was a requirement for a second vote before military action was taken.
When the United States, Britain and their allies ignored that, other Council members responded by ensuring the resolution on Libya specifically excluded the insertion of ground forces. When that too was circumvented by NATO, Russia and China concluded the only safe thing to do with the resolution on Syria was to veto it and prevent the United Nations from being used to provide cover for regime change.
"For China, in effect, Syria has become a firewall," wrote Evan Osnos in an article on "What does China see in Syria?" in the Feb. 28 edition of the New Yorker magazine.
Russia and China have successfully kept the United Nations out of both Syria and Iran recently, leaving the United States and EU to pursue a patchwork of unilateral sanctions ID:nL6E8C5123]. The problem is that many of those sanctions assume China will fall into line with their objectives, for example by demanding cripplingly large discounts for Iranian crude.
To what degree China is willing to comply with extraterritorial U.S. legislation aiming to undermine the government of a key supplier remains extremely unclear. No country enjoys being subject to extraterritorial policymaking.
China's foreign ministry attacked the U.S. decision to impose sanctions on Zhuhai Zhenrong for supplying Iran with refined oil products.
"The U.S. attempt to internationalize its unilateral sanctions against Iran and impose sanctions on a relevant Chinese company based on its domestic law is totally unjustified and runs counter to the content and spirit of Security Council resolutions concerning the Iranian nuclear issue," the foreign ministry said in a statement on its website.
China has more than one reason for caution, given its government has not endorsed the aims of sanctions policy and has deliberately prevented the United States and the EU from taking further action via the United Nations.
During a recent trip to the Middle East, China's Premier Wen Jiabao said China was adamant in opposing any Iranian development of nuclear weapons. But he warned, "I also want to clearly point out that China's oil trade with Iran is normal trade activity" and "legitimate trade should be protected".
If sanctions are to be successful in forcing Iran to give up its nuclear ambitions as advocates hope, they will need the quiet support of China, or at least the country's willingness not to deliberately obstruct them. For the time being, that willingness remains in question. (editing by Jane Baird)
* Saudi official says March supplies to U.S. cut by 300,000 bpd
LONDON, March 23 Saudi Arabia faces a difficult balancing act as it tries to work down excess global crude stocks while protecting relationships with important refining customers in the United States and Asia.