Middle East Strategy at Harvard

From Jacqueline Newmyer

The Chinese national oil company Sinopec has signed a contract to develop Iran’s Yadavaran oil field, according to articles in today’s Financial Times and International Herald Tribune. From Iran’s point of view, the deal is a triumph. It exposes the inability of the United States to build a global coalition to impose economic sanctions on Iran.

By the terms of the contract, Sinopec will have to subcontract with Iranian firms, which will as a consequence, at least in theory, acquire much-needed expertise. But the PRC’s record in Africa and other areas of overseas investment suggests that the Chinese will be quicker to use Iranian firms for manual labor than for sophisticated processes that would involve technology transfer.

From China’s point of view, the award constitutes another step in Beijing’s effort to secure energy supplies from the ground up, supplies that the PRC is acquiring the means to protect en route to the mainland through its program of military modernization. The contract may also be seen as progress in China’s campaign to secure influence in the Middle East at the expense of the United States. The deal, coming on the heels of last week’s NIE downplaying the imminence of an Iranian nuclear weapon (see Steve Rosen’s post on the subject), promises to complicate U.S. efforts to secure Chinese support for economic sanctions should evidence emerge that the Iranians have re-started their weapons program.

Issues left outstanding in this initial contract need to be resolved, including the distribution of oil recovered in the second phase of production. The relationship between the Iranians and the Chinese could sour as Sinopec enters into development of Yadavaran. But at this point, the thought is small comfort.