Just as the United States makes an impassioned push for tougher economic sanctions on Iran, China is reportedly increasing its gas exports to the volatile Middle East nation.
Chinaoil- the state-owned China National Petroleum Corp's (CNPC) trading unit- shipped two cargoes totaling 600,000 barrels of gasoline to Iran in exchange for $55 million, according to Reuters. The cargoes were Chinaoil's first direct sales to Iran since at least January 2009, according to Reuters data.
Additionally, Unipec- the trading arm of the China Petroleum & Chemical Corp. (Sinopec) (NYSE ADR: SNP)- agreed to sell 250,000 barrels of gasoline to Iran.
The sales couldn't come at a worse time for the United States. Washington has spent months lobbying the international community to tighten sanctions on Iran, which is openly expanding its uranium enrichment capacity.
Iran in November announced plans to build 10 uranium enrichment facilities, and earlier this year, officials said construction would start at two sites by March 2011.
While China has in the past been reluctant to support tougher sanctions against Iran, the United States had hoped recent developments would be enough to gain Beijing's support.
However, China's rapid growth in oil imports virtually guarantees that its commercial and political relations with Iran will deepen. China is Iran's No. 2 oil customer and Chinese companies are heavily invested in Iranian oil and gas exploration and development.
Meanwhile, the Red Dragon's relationship with the United States has been strained. U.S. trade officials have long asserted that China undervalues its currency, the yuan, to give its exporters an unfair trade advantage. Meanwhile, many Western companies have complained about being shut out of the Chinese market- a claim that was supported by China's newly imposed "indigenous innovation" rules and high-profile spat with Google Inc. (Nasdaq: GOOG).
Additionally, the United States earlier this year followed through with a $400 billion arms sale to Taiwan and welcomed the Dalai Lama in spite of Chinese admonishments.
On the other hand, Beijing has launched fresh salvos of its own- accusing the United States of devaluing the dollar and enforcing protectionist measures against Chinese companies.
Indeed, the United States and China seem to find themselves at philosophical and political odds as a matter of routine. China has offered to participate in drafting a United Nations resolution to place further sanctions on Iran, but balked at penalizing the nation's energy sector.
It's not just Iran that the United States and China have different opinions on, either. Venezuelan President Hugo Chavez, a staunch ally of Iranian President Mahmoud Ahmadinejad, said over the weekend that China had agreed to extend $20 billion in loans to Venezuela.
CNPC confirmed Monday that it signed several agreements with Venezuela on a long-term credit-for-oil deal and a joint venture to develop the country's Junin 4 oil block. The Chinese state-owned oil company said it also signed a crude oil supply contract with Petroleos de Venezuela (PDVSA) to guarantee the repayment of a 10-year loan.
The deal was just one of many China has struck with multiple Latin American countries to secure resources. That includes a $12 billion bilateral investment fund with Venezuela.
Venezuela already has received, and spent, some $8 billion from China in recent years, which the nation has been paying back with crude oil, The Wall Street Journal reported. Venezuela says it sends some 460,000 barrels a day of crude oil to China, although figures from the Chinese government indicate China only imported an average of 132,000 barrels per day from Venezuela during the first couple months of 2010.
"All the oil that China needs for its growth and consolidation as a power is here," Chavez said as he announced the loans on Saturday.
Similarly, China has anted up to secure resources in Africa, even if that's meant dealing with some unsavory regimes.
For instance, China's friends in Africa have included President Omar Bashir of Sudan - who is currently wanted by the International Criminal Court for war crimes- and Zimbabwe President Robert Mugabe- who has been accused of driving his country into economic ruin and starvation and is heavily sanctioned by the United States and European Union.
"The People's Republic of China (PRC) aids and abets oppressive and destitute African dictatorships by legitimizing their misguided policies and praising their development models as suited to individual national conditions," said a report from The Heritage Foundation. "Moreover, China rewards its African friends with diplomatic attention and financial and military assistance, exacerbating existing forced dislocations of populations and abetting massive human rights abuses in troubled countries such as Sudan and Zimbabwe."
China is the largest supplier of arms to Sudan, which received $7 billion of Chinese defense exports between 2003 and 2007, according to the U.S. Department of Defense.
Still, Beijing insists that its relationship with Africa is mutually beneficial. And the accusation that China's aims are purely self-serving is "not fair," Zhong Jianhua, a Chinese ambassador to South Africa told Reuters.
"Fortunately, [African nations] don't just follow that Western media perception of Chinese investment," he said.
And that perception means even less in Beijing, according to many analysts who believe China will continue to pursue advantageous business deals around the world, regardless of political fallout.
"China is not as concerned as they used to be about irritating the U.S.," Michael Shifter, president of the Inter-American Dialogue, a Washington-based think tank, told The Journal. "I think they will continue to be very aggressive about investing in places like Venezuela."
News & Related Story Links:
- Reuters:
Exclusive: China's top oil firms sell gasoline to Iran-trade - Wall Street Journal:
China's $20 Billion Bolsters Chávez - Money Morning:
Pacifying the Panda: U.S. Companies Must Take a New Approach to China - Money Morning:
Indonesia Catching China's Eye - Money Morning:
Google Unveils Another Surprise Twist in China Drama - Money Morning:
The Scramble for Africa: Profiting From World's Largest Cache of Commodities - Money Morning:
Saudi Arabia Shifts its Focus to China as the United States Falls Out of Favor - Money Morning:
Will Taiwan Arms Sale Ground Boeing? - Money Morning:
Washington - Not China- Is the Real Manipulator Here - Money Morning:
Tough Talk Over Iran Could Lead to a Total Withdraw - Money Morning:
Oil Companies Continue to Take Risks Despite Objections - Money Morning:
Where Should We Invade to Bring Down Oil Prices? - Money Morning:
Afghanistan Opens For Business With China - Money Morning:
How China is Beating the United States in the Global Oil Game - Money Morning:
Venezuela Says "Adios" to Most Foreign Investment, Making it a Stay-Away Play for Investors