Earlier this month, the European Union and Japan, Iran’s second- and third-largest oil customers, signaled willingness to reduce their Iranian oil orders. When and how they do that, however, remains unclear.
BY TOM LASSETER AND KEVIN G. HALL | MCCLATCHY NEWSPAPERS
BEIJING — Most days, the announcement of an $8.5 billion joint venture oil deal between Saudi Arabia and China wouldn’t raise eyebrows. Riyadh, after all, is China’s largest supplier of oil. But with the United States pushing for an oil embargo against Iran, China’s third-largest oil provider, the calculus has changed.
China is emerging as a key test of whether the West and its allies will be able to squeeze Tehran into slowing its nuclear program. The role China will play in the U.S.-led effort is still far from clear, but the United States and others are watching Beijing’s moves closely for clues about its intentions.
As the biggest importer of Iranian oil — some 20 percent of Iran’s output — China has great sway over American plans. Its decision to accept, partially agree to or spurn the push for new economic curbs on Tehran will be crucial to Washington’s efforts to starve Iran’s economy as punishment for the country’s alleged attempts to develop a nuclear weapon.
For years, and in private, U.S. diplomats have been working quietly to achieve just that outcome. McClatchy Newspapers reported last May that secret diplomatic cables obtained by WikiLeaks document how the State Department pressed Saudi Arabia to step up its oil exports to China in a bid to weaken rival Iran’s foreign oil sales and Tehran’s sway over Beijing. It worked, because by 2010 Saudi Arabia had become the top oil supplier to China.
It was possible partly because Saudi crude is similar in composition to Iranian oil.
“In this case, the Saudis could do a lot of the offset of the cessation of sales by Iran,” John Kilduff, a veteran energy analyst with Again Capital in New York, said in a recent interview.
But it’s not just a question of Saudi supply to China. Europe, South Korea and Japan need to replace Iranian oil, too.
“It’s pretty clear that the big buyers … are relatively dependent on Iranian oil,” Kilduff said.
Earlier this month, the European Union and Japan, Iran’s second- and third-largest oil customers, signaled willingness to reduce their Iranian oil orders. When and how they do that, however, remains unclear.