U.S. Urges Arab States to Lift Oil Exports to China

Monday, October 19, 2009

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By JAY SOLOMON for the BBC's BIODUN IGINLA

WASHINGTON -- The Obama administration is encouraging key Arab states to boost oil exports to China in order to reduce Beijing's reliance on Iranian energy and pare Chinese resistance to tougher sanctions over Tehran's nuclear program.
The administration's strategy has yielded a gain: the United Arab Emirates recently agreed to boost its exports to China to between 150,000 to 200,000 barrels per day from a current level of 50,000 over the next six months, in part in response to Washington's request, according to U.S. and Emirati officials.
A senior Emirati official said Abu Dhabi plans to make a significant additional increase "within the next three years."
Saudi Arabia, long at odds with Tehran, also appears prepared to offer China more oil to make up for any losses it incurs as part of an international effort to punish Iran, according to people familiar with Saudi thinking.
The kingdom also buys considerably more weapons and consumer products from China than Iran does, and is weighing how to leverage those purchases to persuade Beijing to distance itself from Tehran.
The effort is as much about realigning diplomatic alliances as shifting the oil supply, U.S. officials said.
Many diplomats and Middle East analysts are skeptical that the U.S. and the Arab states will succeed over the long term in breaking Beijing's reliance on Iranian crude.
Saudi Arabia and the U.A.E. are both constrained in exporting oil by quotas established by the Organization of Petroleum Exporting Countries. Industry analysts question how the two countries could significantly boost exports to China without flouting those quotas and flooding markets with excess oil.
Riyadh and Abu Dhabi also might have to shuffle export contracts in order to find supply for China.
Washington and its European allies increasingly view China as the pivotal player in an international effort to pressure Tehran economically over its nuclear program. Iranian officials are scheduled to meet representatives from the U.S., France and Russia in Vienna Monday in a bid to conclude an agreement for the international community to better monitor and manage Tehran's stockpile of low-enriched uranium.
Growing sanctions against Iran could lead to significant instability in the Persian Gulf. Saudi Arabia and the U.A.E. could be important partners in guaranteeing Beijing's continued oil supply. China's consumption is expected to grow to around 20 million barrels of oil a day by 2030 from its current level of eight millions barrels a day.
Saudi Arabia is the largest oil exporter to China, sending 740,000 barrels a day during the first five months of 2009. Iran is the second-largest supplier at about 540,000 barrels a day.
"We've been telling the Arab states to directly express their concerns to Russia and China about Iran's actions," said a U.S. official involved in the dialogue. "And we stressed that they should use their leverage."
Beijing is the second-largest buyer of Iranian oil. The Asian giant has pledged tens of billions of dollars in new investment in Iran's oil and gas infrastructure in coming years. Chinese Premier Wen JiabaoWen Jiabao damped U.S. hopes for broad cooperation on Iran last week, praising Beijing's "widened and deepened" relationship with Tehran following a meeting with Iranian Vice President Reza Rahimi.
China and Russia have the ability to block new sanctions proposals being discussed at the United Nations Security Council. Beijing has repeatedly expressed opposition to enacting expansive financial penalties against Tehran. Changing tack, the Obama administration has engaged in discussions in recent months with key oil-producing Arab states to find ways to use their energy and financial ties with Beijing to win Chinese cooperation on the Iranian nuclear issue, said senior U.S. and Arab officials.
The U.S. hopes nations such as Saudi Arabia, the U.A.E and Kuwait can step up oil exports to China as a signal that they could offset any losses China might incur by pressuring Iran. Washington also hopes these countries can impress upon China that the Arab states' markets and energy reserves are far more important to Beijing than Iran's.
China's Ministry of Foreign Affairs and Beijing's National Energy Administration didn't respond to requests for comment about the U.A.E. offer of additional oil.
A spokesman at Saudi Arabia's Washington office didn't respond to requests for comment.
—Sue Feng contributed to this article. Posted by BiodunIginla at 1:55 AM Labels: bbc news, biodun iginla, china, obama administration, oil production, united arab emirates (uae) 0 comments:

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