Politics & Policy

Making China Pay

To get at Iran and North Korea, we'll have to go through Beijing.

The looming crisis over Iran’s nuclear weapons program is turning attention to China’s role as the protector of the two remaining “axis of evil” regimes. On January 9, the day before Iran removed the International Atomic Energy Agency (IAEA) seals at its uranium-enrichment plant at Natanz, its deputy foreign minister Mehdi Safari met with Chinese Foreign Minister Li Zhaoxing and Vice Foreign Minister Zhang Yesui in Beijing. The official Chinese statement was that “Zhang reiterated the principled position of the Chinese side on properly settling the Iranian nuclear issue through diplomatic negotiation. Safari briefed Zhang about the views and considerations of the Iranian side in this respect.” It is hard not to suspect that the meeting was to clear Tehran’s impeding action with Beijing.

After the news broke, foreign-ministry spokesman Kong Quan told reporters on Jan. 10, “We believe that the Iranian nuclear issue should be resolved within the framework of IAEA. In the current context, the most feasible approach is still the negotiation between the three EU countries and Iran.” Beijing knows that two years of EU talks have gone nowhere. Beijing also knows that talking is the alternative to acting. As long as the only country acting is Iran, Tehran will prevail.

Actions Speak Louder than Words

Weeks earlier, Chinese officials pledged to veto any U.S. or European attempt to impose U.N. sanctions on Iran, particularly any involving an embargo on oil shipments or energy development. In 2004, Iran agreed in principle to sell China 250 million tons of liquefied natural gas over 30 years, a deal valued at $70 billion. China already imports 14 percent of its oil from Iran. Sinopec, a state-owned energy company, hopes to develop Iran’s enormous Yadavaran oil field. These deals violate the U.S. Iran-Libya Sanctions Act, which penalizes foreign companies for investing more than $20 million in Iran. China will not hesitate to oppose (or violate) similar sanctions if imposed by the U.N. or by a U.S.-EU coalition.

Other sanctions, such as bans on the sale to Iran of high-tech products or military gear, will also not be acceptable to Beijing. Iran is a growing market for its manufacturing exports, which China uses to pay for Iranian oil. Indeed, Beijing would like to use the crisis to cut into Europe’s trade with Iran, a factor that will dampen the eagerness of the EU to levy its own sanctions on Iran.

China has also been “hosting” the Six-Party Talks on North Korea’s nuclear program. As does Tehran, Pyongyang acts while everyone else just talks–or prepares to talk. There have been only four actual rounds of negotiations since the process started in August 2003, and no progress. Beijing’s insistence on a “diplomatic solution” is code for its opposition to any use of pressure or sanctions against North Korea.

So before there can be effective pressure on Iran or North Korea, there must be pressure on China. Beijing is very dependent on exports to the American market as the primary engine of its rapid economic growth. China’s trade surplus with the United States in 2004 was $162 billion and probably topped $200 billion in 2005. There is also a considerable flow of American capital and technology into China. These flows give Washington considerable leverage, which Beijing is well aware of. Indeed, on December 12, the State Council of the People’s Republic of China published a white paper entitled “China’s Peaceful Development Road” which sought to insulate economic issues from diplomatic issues. Yet, when this same paper proclaims “the principle economic target is to double the 2000 per-capita GDP by 2010,” the implications for such an increase in the resources available to the Beijing regime cannot be ignored in other capitals, and not just in Washington.

Beijing’s claim in “Peaceful Development” that it will never turn its increasing wealth into international power is no more credible than the claims it has made in other white papers issued in 2005. The list includes: “Building a Political Democracy in China” (October); “China’s Endeavors for Arms Control, Disarmament and Non-Proliferation” (September); “New Progress in China’s Protection of Intellectual Property Rights” (April); and “China’s Progress in Human Rights” (April).

Making Our Money Talk

There is growing support for doing something to pressure Beijing to change its ways. Last year, when state-owned China National Offshore Oil Corporation (CNOOC) tried to buy California-based Unocal Corp, the outcry on Capitol Hill ultimately forced CNOOC to withdraw its bid. The House of Representatives, in a healthy show of bipartisanship in foreign policy, passed a resolution declaring “a Chinese state-owned energy company exercising control of critical United States energy infrastructure and energy production capacity could take action that would threaten to impair the national security of the United States.” This resolution passed by a vote of 398-15.

The strongest support for continued U.S. appeasement of Beijing has come from large American corporations which have invested in China. However, continued failure to protect intellectual property, the theft of which the U.S. Trade Representative’s 2005 report on Chinese trade barriers called “epidemic,” is causing many companies to rethink their bets on China as a market in which they will be allowed to thrive. The Heritage Foundation’s 2005 Index of Economic Freedom ranked China a lowly 111 out of 161 countries (tied with Zambia and behind Pakistan), with property rights, foreign investment, regulation, and financial markets rated as typical of a “repressed” economy. American manufacturers and their congressional allies are also turning up the heat on Beijing’s manipulation of international currency values.

American diplomats should advance the argument that Beijing needs to act more responsibly as a member of the global community to curb the dangerous behavior of Iran and North Korea. Unfortunately, Deputy Secretary of State Robert Zoellick, who raised the “stakeholder” concept in regard to China’s role in world affairs last September, apparently made no progress with Premier Wen Jiabao or other officials on the Iranian issue during his January 24 visit to Beijing. At his press conference after the talks, he dodged questions related to Iran, whereas the press conference conducted by the Chinese Foreign Ministry restated its previous position on negotiations with Tehran. Two days later, Ali Larijani, the Secretary of Iran’s Supreme National Security Council, arrived in Beijing to further coordinate diplomatic strategy. A former Revolutionary Guards leader, Larijani is Tehran’s top negotiator on the nuclear issue.

As a former U.S. trade representative, Zoellick remains wedded to the notion that international economics can be divorced from international politics. This is clearly not a tenable concept, as shown by China’s own strategic behavior. Beijing must be told that its continued easy access to global markets, upon which its rapid development depends, will be at risk if it continues to ally itself with rogue states that pose a threat to global security.

William R. Hawkins is senior fellow for national-security studies at the U.S. Business and Industry Council in Washington, D.C.


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