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A different light

China and Russia are wary of backing US moves to tighten international sanctions on Iran. But China, a big oil and gas importer, and Russia, a major energy exporter, also appear to have divergent interests over Iran's nuclear programme. The tensions this programme is generating with the United States have fanned concerns about military conflict in the Persian Gulf. This has helped drive oil prices to record levels.

Beijing should be worried. To fuel its turbocharged economic growth, China now imports about half the oil it consumes and nearly 50 per cent of this is from the Middle East. Oil imports cost China over US$60 billion last year. Following the strong price surge this year, the bill will be much higher. Instability in the Gulf threatens China's energy security.

Meanwhile, Russia profits mightily from ever-higher oil and gas prices. It is using petrodollar income to rebuild its economic and military strength - and extend its influence in Asia.

Iran, stability in the Gulf and energy supplies will be prominent topics on the agenda of Premier Wen Jiabao when he visits Russia early next week as part of a four-country tour of former Soviet republics that started yesterday. In Moscow, Mr Wen will meet his Russian counterpart Viktor Zubkov and President Vladimir Putin. The increasing amounts of oil and gas that China wants to buy from Russia to ease dependence on the Middle East will be based on global market prices.

Despite Moscow's interest in keeping energy prices high and Beijing's interest in seeing them fall, it is Russia rather than China that has been more active in restraining Iran's nuclear ambitions. Both countries have joined the other three permanent members of the UN Security Council - the US, France and Britain - in passing two resolutions since last December calling on Iran to suspend uranium enrichment and other sensitive nuclear activities. Beijing and Moscow insist that no further international sanctions should be imposed, at least until the UN watchdog, the International Atomic Energy Agency, reports later this month on whether it has been able to resolve outstanding questions about Iran's past nuclear behaviour.

In a recent meeting with Iranian leaders, Mr Putin reportedly proposed a 'time out' on further sanctions if they suspended uranium enrichment operations, which could be used to make fuel for nuclear reactors or fissile material for nuclear weapons. Tehran insists its intent is peaceful. But Mr Putin refused to set a time for finishing Iran's first nuclear power reactor, which Russia is building. The delay is seen as leverage on Tehran. Moscow has also offered Iran access to a nuclear bank it has established in Russia to supply reactor fuel and other services to countries that agree not to enrich uranium.

Mr Putin told a European Jewish Congress in Moscow recently that Russia and Israel were the two countries most threatened by a nuclear Iran. China, much further away than Russia or Israel from Iranian ballistic missiles, evidently sees Iran in a significantly different light: Iran - in its confrontation with the US over the nuclear issue, Iraq and Afghanistan - is weakening America and pinning it down in the Middle East. This gives Beijing a freer hand to expand its influence in Asia and the Pacific.

Iran also gives China a new foothold in the energy-rich Gulf. Beijing is cementing its influence through arms sales and trade, seeking to push itself ahead of Russia on both fronts. China could overtake Germany this year as the top exporter of goods to Iran. Two-way trade between China and Iran was worth about US$16 billion last year. Most of it is in Iranian crude oil sales to China. Iran provided nearly 12 per cent of Chinese oil imports last year, a fraction more than Russia. They were the third- and fourth-largest single suppliers, respectively, after Angola and Saudi Arabia, each with around 17 per cent. China has also signed outline agreements with Iran to develop oil and gas fields into major export projects.

Beijing may also see Iran as the best way into neighbouring Iraq after the US leaves. Iraq has the world's third-largest proven conventional oil reserves, after Saudi Arabia and Iran. In June, the Iraqi government revived a contract signed by the Saddam Hussein administration allowing China's largest state-owned oil company to develop an oil field in Iraq. Last month, Iraq agreed to award US$1.1 billion in contracts to Iranian and Chinese firms to build several power plants to generate electricity in Iraq.

Chinese activity has not gone unnoticed in Washington. Officials have warned that Beijing is putting the US-China relationship at risk. John Negroponte, deputy secretary of state and former director of national intelligence, told a New York meeting last month of Americans and Chinese that Beijing should reconsider its investments in Iran's oil and gas sector.

'We have made it clear to Beijing that these types of investments, along with continued arms sales, send the wrong signal to the Iranian regime and raise serious concerns,' he said. 'Given Iran's intransigence on its nuclear programme and its active support of terrorism, now is not the time for normal relations and business as usual with Iran.'

Michael Richardson is a security specialist at the Institute of Southeast Asian Studies in Singapore. This is a personal comment. [email protected]

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