West worries China may undermine Iran sanctions efforts

U.S. and European officials in charge of efforts to tighten sanctions against Iran have expressed new concerns that China is quietly positioning itself to undermine the latest measures.

In the last two weeks, the United States and the European Union imposed new sanctions to pressure Tehran to curtail its nuclear program. The measures, which augment United Nations sanctions adopted this month, aim to discourage international investment in Iran, particularly its energy sector.

But U.S. officials fear that China, which is skeptical of sanctions and hungry for energy, will step up its trade and investment with Iran as other countries scale back to comply with trade restrictions.

The concerns point to the possibility that new unilateral sanctions approved by the Obama administration and its European allies could, in effect, backfire by putting Western firms at a disadvantage while benefiting China and failing to affect Iran’s nuclear program.

“This is a significant challenge that we face,” Stuart Levey, the Treasury Department’s top sanctions official, told a Senate committee last week.

Levey added that the Obama administration will “push and urge” China to scale back an economic relationship that has flourished over the last decade.

Sanctions have been widely questioned as an effective means of persuading a defiant Iran to give in to demands for opening its nuclear program to international inspectors and scaling back its ambitions.

CIA Director Leon E. Panetta said Sunday in an ABC interview that the sanctions would have “some impact” on Iran, but by themselves would “probably not” deter Tehran’s nuclear ambitions.

China, despite its misgivings, supported a fourth round of U.N. sanctions this month after Iran refused to scale back its expanding uranium enrichment program. U.S. officials and allies charge that Iran’s effort is aimed at developing nuclear weapons, which Tehran denies.

The U.N. measures were diluted during negotiations among the 15 members of the U.N. Security Council, and passed on a split vote. China’s support depended on the inclusion of language that permits continued foreign investment in Iran’s oil and gas sector.

Within days, U.S. and European officials quickly added their own tougher measures in hopes of discouraging petroleum sales, energy investment and foreign financing.

But U.S. officials fear that China could secretly sell gasoline and other refined petroleum products to Iran through intermediaries in the Persian Gulf. And they worry that China could expand its growing investments in the oil and gas sector.

Rep. Howard L. Berman (D-Valley Village), chairman of the House Foreign Affairs Committee and a leading advocate for U.S. sanctions legislation approved last week, said in an interview that Chinese “backfilling” — taking the place of businesses with Western roots — is “a huge concern.”

U.S. officials have received complaints from allied countries that have trimmed their ties with Iran, only to see the Chinese fill any void.

Japanese officials have complained regularly to the Americans in private, said Fariborz Ghadar, a former Iranian official now at the Center for Strategic and International Studies. A typical complaint, Ghadar said, is: “You asked us to cut back — we backed out — and now the Chinese are stepping in.”

In North Korea, Chinese cooperation with U.N. sanctions against Pyongyang has been considered spotty. Beijing has been unwilling to disclose information about Chinese business contacts with the North Koreans, experts said.

“There’s a track record of China not cooperating with the mechanisms set up to implement the international sanctions,” said Mark Hibbs of the Carnegie Endowment for International Peace. “In the case of unilateral sanctions by the United States, cooperation is likely to be even less.”

In Iran, China “has given no commitment not to take up the slack,” said a Western diplomat, who spoke on condition of anonymity in keeping with diplomatic protocol. Iran’s trade with China has been growing and reached an estimated $36.5 billion last year, surpassing trade with the European Union.

In some cases, the U.S. may find it difficult to pressure Chinese firms to limit business ties with Iran because many do no business in the United States and won’t care about U.S. threats to cut off access to the American market, as allowed under the sanctions legislation.

For Chinese companies that could be punished under the U.S. sanctions measure, the U.S. would risk complicating its relationship with one of its largest trading partners.

Nevertheless, U.S. officials insist they intend to police the new sanctions vigorously.

One senior official assigned to the task is Robert Einhorn, a veteran State Department nuclear nonproliferation specialist whom the Chinese have called “the dentist” because of his willingness to come down hard on foreign officials.

Still, there are some positive signs for the Obama administration.

Although China wants to expand economic ties with Iran, it is moving slowly in areas as it assesses the potential effects of international pressure. The Chinese government may not want to invest large sums in major gas and oil projects if there is a risk that Iran’s isolation could make it difficult to complete the projects, analysts said.