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The Wall Street Journal: Moves to Stymie Iran Strain U.S.-China Ties

EXTRACT: Western oil companies including Anglo-Dutch Royal Dutch Shell PLC and France’s Total SA have invested in Iran’s energy sector, but U.S. sanctions have stymied development of those projects.

THE ARTICLE

By SHAI OSTER
January 12, 2007; Page A4

BEIJING — China and the U.S. are at loggerheads over the widening American clampdown on Iran’s international business dealings, as Beijing told Washington not to interfere in a possible multibillion-dollar natural-gas deal between Iran and China’s biggest offshore oil company.

“We think this kind of cooperation and relationship is legitimate. Normal cooperation should not be interfered” with, Chinese Foreign Ministry spokesman Liu Jianchao said at a news conference. He said China believes the U.S. is interfering in Beijing’s relationship with Iran.

The U.S. expressed its concerns last month after Iranian officials said China National Offshore Oil Corp., parent of Cnooc Ltd., had sealed a deal to develop Iran’s Northern Pars natural-gas field. Such a deal could undermine U.S.-led efforts to isolate Iran for refusing to abandon its nuclear program. The United Nations Security Council recently authorized tougher sanctions in a bid to persuade Iran to stop producing enriched uranium, which can be used for nuclear-power reactors — as Tehran insists is its goal — or for bombs.

“We think this is a particularly bad time to be initiating major new commercial deals with Iran,” said Susan Stevenson, spokeswoman for the U.S. Embassy in Beijing.

The U.S. also is pushing on other fronts to isolate Iran’s economy. Germany’s Commerzbank AG said recently it will stop handling U.S.-dollar transactions for Iran at the bank’s New York branch by Jan. 31. The U.S. Treasury Department this month named Iran’s Bank Sepah and its subsidiaries as weapons proliferators and barred banks operating in the U.S. from handling any transactions on their behalf.

Iran, meanwhile, is reaching out to Asian investors as the U.S. noose tightens. The Iranian government this week announced that state energy giant National Iranian Oil Co. signed a $20 billion memorandum of understanding with Malaysia’s SKS Ventures on the development of the offshore Golshan and Ferdows gas fields in the Persian Gulf.

Liu Junshan, a spokesman for China National Offshore Oil, said yesterday negotiations with Iran continue. Iranian officials had put the value of a deal at $16 billion.

China’s two other main state-owned energy companies, China National Petroleum Corp., parent of listed PetroChina Corp., and China Petrochemical Corp. parent of listed Sinopec Corp., are also in talks to develop oil or natural-gas fields in Iran.

Western oil companies including Anglo-Dutch Royal Dutch Shell PLC and France’s Total SA have invested in Iran’s energy sector, but U.S. sanctions have stymied development of those projects.

China’s soaring energy needs, coupled with stagnating domestic oil and gas production, have forced it to rely on more imports. It is now the world’s second-biggest consumer of oil, after the U.S.

But China’s growing dependency on imported oil and gas frequently has put it at odds with U.S. foreign policy in countries such as Sudan or Iran.

Iran, which has some of the world’s largest gas reserves, has been unable to develop most of its fields — or to build terminals to ship liquefied natural gas — because of diplomatic pressure on potential foreign partners and because of differences with possible partners over pricing.

Write to Shai Oster at [email protected]

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