BEIJING—A steep drop-off in China's crude-oil imports from Iran earlier this year, which companies involved blamed on a contract dispute, has provided a face-saving way for Beijing to appease the U.S. even as it officially maintains opposition to U.S. sanctions against Tehran, analysts said.
The U.S. decision on Thursday to exempt China from penalties targeting financial institutions that do business with Iran's energy sector came after data showing that China's imports of crude from Iran over the first five months of 2012 were down almost 25% from a year earlier.
China International United Petroleum & Chemical Co., 0386.HK +2.23% known as Unipec, and National Iranian Oil Co. started the year stuck in drawn-out contract negotiations.
Though they reached agreement in February, imports didn't recover until April; by May they were back to levels similar to those of a year earlier.
The exemption appears in part to be a goodwill gesture as both China and the U.S. enter sensitive political periods and remain starkly divided on diplomatic and military issues ranging from continuing violence in Syria to strengthened U.S. security ties with China's neighbors.
The exemption also is a hopeful sign for Chinese state-owned energy companies, which are eager to make inroads in the U.S. but have faced repeated political opposition there.
Chinese majors such as Unipec's parent China Petroleum & Chemical Corp., or Sinopec Corp., are venturing abroad in search of higher returns, and U.S. energy projects look particularly attractive because of the recent boom in North American shale gas, which China hopes to replicate back home.
Sinopec Chairman Fu Chengyu is no stranger to the U.S., having been rebuffed in a bid to buy Unocal Corp. in 2005 when he was the head of China's largest offshore oil producer, Cnooc Ltd. CEO +3.66% Sinopec recently completed its first major U.S. deal, a $2.44 billion purchase of a one-third stake in five shale-gas assets owned by Devon Energy Corp., DVN +2.04% and more investments in the region are likely to follow.
At a daily news briefing on Friday, Chinese Foreign Ministry spokesman Hong Lei reiterated China's longstanding position that its oil imports from Iran were "completely reasonable and lawful."
Western diplomats and Chinese analysts have said the U.S. and Chinese governments are eager to avoid diplomatic strains ahead of U.S. elections in November and a once-a-decade Communist Party leadership shuffle set to begin in the fall.
"This saved both sides from an ugly test," said Shi Yinhong, an expert on U.S.-China relations at Renmin University in Beijing. "China always reluctantly goes some step to meet the West, but never meets it in a full way."
The diplomatic challenges posed by the Iranian nuclear program are particularly acute for China, which has been grooming its presumptive next president and Communist Party chief, Xi Jinping, to manage its complex relationship with Washington.
Mr. Xi is expected to take over as party chief this fall and as president in 2013, succeeding Hu Jintao.
China, Japan, India and South Korea combined to take in almost half of Iran's crude exports in the first six months of 2011, according to the U.S. Energy Information Administration. Last year, Iranian crude accounted for about 11% of China's overall crude imports.
India and Japan both said crude imports from Iran are down this year, but stopped short of tying it to U.S. pressure. South Korea said it would halt Iranian crude imports from July 1 because of European Union sanctions that would cut off insurance services for crude shipments from Iran.
As for China, even if crude shipments from Iran match last year's for the rest of 2012, the full-year total will be down 12%, according to calculations by The Wall Street Journal.
Michal Meidan, a China analyst for political-risk consultancy Eurasia Group, said extending the waiver was a "tricky decision" for the Obama administration.
"They used the import reduction as the legitimate cover for granting the waiver, but this will likely become a point that [his opponent Mitt] Romney will use in his campaign….
Chinese adherence to sanctions is very partial." While diplomats are working to placate Washington, she said, "business interests are still pursuing their own goals."
wsj.com
The U.S. decision on Thursday to exempt China from penalties targeting financial institutions that do business with Iran's energy sector came after data showing that China's imports of crude from Iran over the first five months of 2012 were down almost 25% from a year earlier.
China International United Petroleum & Chemical Co., 0386.HK +2.23% known as Unipec, and National Iranian Oil Co. started the year stuck in drawn-out contract negotiations.
Though they reached agreement in February, imports didn't recover until April; by May they were back to levels similar to those of a year earlier.
The exemption appears in part to be a goodwill gesture as both China and the U.S. enter sensitive political periods and remain starkly divided on diplomatic and military issues ranging from continuing violence in Syria to strengthened U.S. security ties with China's neighbors.
The exemption also is a hopeful sign for Chinese state-owned energy companies, which are eager to make inroads in the U.S. but have faced repeated political opposition there.
Chinese majors such as Unipec's parent China Petroleum & Chemical Corp., or Sinopec Corp., are venturing abroad in search of higher returns, and U.S. energy projects look particularly attractive because of the recent boom in North American shale gas, which China hopes to replicate back home.
Sinopec Chairman Fu Chengyu is no stranger to the U.S., having been rebuffed in a bid to buy Unocal Corp. in 2005 when he was the head of China's largest offshore oil producer, Cnooc Ltd. CEO +3.66% Sinopec recently completed its first major U.S. deal, a $2.44 billion purchase of a one-third stake in five shale-gas assets owned by Devon Energy Corp., DVN +2.04% and more investments in the region are likely to follow.
At a daily news briefing on Friday, Chinese Foreign Ministry spokesman Hong Lei reiterated China's longstanding position that its oil imports from Iran were "completely reasonable and lawful."
Western diplomats and Chinese analysts have said the U.S. and Chinese governments are eager to avoid diplomatic strains ahead of U.S. elections in November and a once-a-decade Communist Party leadership shuffle set to begin in the fall.
"This saved both sides from an ugly test," said Shi Yinhong, an expert on U.S.-China relations at Renmin University in Beijing. "China always reluctantly goes some step to meet the West, but never meets it in a full way."
The diplomatic challenges posed by the Iranian nuclear program are particularly acute for China, which has been grooming its presumptive next president and Communist Party chief, Xi Jinping, to manage its complex relationship with Washington.
Mr. Xi is expected to take over as party chief this fall and as president in 2013, succeeding Hu Jintao.
China, Japan, India and South Korea combined to take in almost half of Iran's crude exports in the first six months of 2011, according to the U.S. Energy Information Administration. Last year, Iranian crude accounted for about 11% of China's overall crude imports.
India and Japan both said crude imports from Iran are down this year, but stopped short of tying it to U.S. pressure. South Korea said it would halt Iranian crude imports from July 1 because of European Union sanctions that would cut off insurance services for crude shipments from Iran.
As for China, even if crude shipments from Iran match last year's for the rest of 2012, the full-year total will be down 12%, according to calculations by The Wall Street Journal.
Michal Meidan, a China analyst for political-risk consultancy Eurasia Group, said extending the waiver was a "tricky decision" for the Obama administration.
"They used the import reduction as the legitimate cover for granting the waiver, but this will likely become a point that [his opponent Mitt] Romney will use in his campaign….
Chinese adherence to sanctions is very partial." While diplomats are working to placate Washington, she said, "business interests are still pursuing their own goals."
wsj.com
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