Geithner Presses China on Iran
I was on Bloomberg today, talking about U.S. Treasury Secretary Timothy Geithner’s visit to Beijing. You can watch and listen to what I had to say here.
One of the main purposes of Geithner’s trip is to try to persuade China’s leaders to cooperate with the latest Western sanctions on Iran — in particular, a new U.S. law that President Obama signed on Dec. 31 that imposes tough sanctions on any bank that does business with Iran’s central bank, which facilitates most of Iran’s oil sales. Since China is Iran’s #1 oil customer, accounting for 20% of Iranian exports, and relies on Iran for a hefty 11% of its imported oil supplies, that potentially puts the U.S. on a collision course with the Chinese banking system.
Obama actually opposed the measure, which was slipped into the annual defense appropriations bill, saying in his signing statement that it encroached on his authority to conduct foreign policy and he would enforce it only as he saw fit. There is a waiver provision in the law that allows the President to hold off on sanctions, if he gets some kind of cooperation in return. But as I said on Bloomberg, it’s clear that the GOP front-runner, Mitt Romney, fully intends to use China as a stick to beat Obama throughout the election, which makes it hard for Obama to say he’s granting Chinese banks a “free pass” on doing business with Iran. For that matter, Obama does seem serious about trying to rachet up pressure on Iran to abandon its nuclear program, by isolating it economically and financially.
The Chinese, on the other hand, are keenly aware that their reliance on imported oil over distant supply routes would be a major vulnerability in the event of any future conflict with the U.S. With that in mind, there’s no way the Chinese will let the U.S. dictate who they can buy oil from and on what terms. Given China’s half-hearted enforcement of existing sanctions on North Korea and Iran, there’s no reason to expect much enthusiasm now. After all, from their perspective, Iran is America’s problem, not theirs. That doesn’t mean, of course, the Chinese are above using the U.S. sanctions — and the growing reluctance of other customers like Japan to buy Iranian crude — as a means of leverage for squeezing a better deal out of Iran.
You can read some of my other comments, as well as additional details related to this story, in this Wall Street Journal article and this AFP report.
Patrick Chovanec 
Saw the WSJ and had 2 thoughts. 1.Most my conservative F.book friends would not raise an eye for the timje to look, let alone read it. and 2. We just had the U.S. dollar get it’s throaght slit by a sharp, unnoticed straight razzor. he dollar, still standing, is a dead man standing, unaware of the mortal wound. I hope at least the second proves to be over-reaction on my part.
“We will see” how that isolation thingie on the part of Obama goes….
Right. It’s not that Iranian oil is more secure — it isn’t (unlike Kazakh oil, for instance). My point is that given this broader vulnerability, the Chinese have no wish to establish the precedent of allowing the US to limit their options.
They seem to pointedly push that “options to stay open” issue with every chance they get, to talk how we are forcing them or hemming them or provoking them…
Iran is a great distraction to US debt insolvency.
“The Chinese, on the other hand, are keenly aware that their reliance on imported oil over distant supply routes would be a major vulnerability in the event of any future conflict with the U.S.”
Iranian oil is no different from any other Middle Eastern oil (Straights of Hormuz/Malacca). This is quite irrelevant to the Chinese deliberations
And now you are an Iran specialist? Amazing.
Is there anything that you will not talk about, claim expertise on?
I wasn’t really commenting as an Iran specialist, but as someone who closely follows the US-China economic and financial relationship, which is the relevant issue here.