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.