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China’s Wen to visit key MidEast energy powers

China's Premier Wen Jiabao will visit three key Middle Eastern oil and gas suppliers -- Saudi Arabia, the United Arab Emirates and Qatar -- from the weekend, amid signs that Beijing wants to expand its options in the face of US sanctions aimed at Iran.

January 10, 2012 10:54 by

An announcement on Tuesday from the Chinese Foreign Ministry ( said Wen would meet host leaders to “thoroughly exchange views on developing bilateral relations and on international and regional issues of common concern”.

Wen’s trip, starting in Saudi Arabia, comes while Iran faces tightening Western sanctions over its nuclear programme. Beijing faces pressure to go along with the US sanctions by cutting what it pays for Iranian oil, if not the volume it buys.

China already cut oil imports from Iran in January and February in a dispute over contract terms, and has been looking for alternative supplies.

Wen’s talks are sure to cover, at least in general terms, energy cooperation with his Middle Eastern hosts, said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University in east China.

“On any visit to the Middle East, these issues will be discussed,” Lin told Reuters by telephone.

“Generally, there will be something that comes out of a visit like this, because a visit by a premier is not your average visit,” he said of discussion on oil and gas.

China bought a combined 1.15 million barrels per day (bud) from these three nations in the first 11 months of 2011, customs data showed, nearly a quarter of its total crude imports.

US President Barack Obama recently authorised a law imposing sanctions on financial institutions that deal with Iran’s central bank, its main clearinghouse for oil exports.

Treasury Secretary Timothy Geithner was due to arrive in Beijing late on Tuesday for talks that were likely to cover the banking sanctions against Iran.

That US sanctions threat could be a worry for China, the biggest buyer of Iranian oil, followed by India and Japan. Only Saudi Arabia and Angola sell more crude than Iran to China.

“Correctly speaking, it’s not a matter of China necessarily reducing imports (from Iran), but of looking to increase imports from elsewhere,” said Lin from Xiamen University.

“China, as well as Japan and other big oil consumers, is already turning its attention elsewhere,” he said.

China has backed a series of UN Security Council resolutions calling on Iran to halt uranium enrichment activities, while working to ensure its energy ties are not threatened.

But China, which as a permanent member wields a Security Council veto, has also criticised the United States and European Union for imposing separate sanctions on Iran and said they should take no steps reaching beyond the UN resolutions.

The Chinese announcement of Wen’s trip did not mention any possible energy or investment deals during Wen’s six-day Middle East trip.

But on Sunday, Saudi Arabia’s state oil giant, Saudi Armco , said it will sign a final deal next week to build a 400,000 barrel-per-day (bud) oil refinery in Yanbu with China’s Sinopec Group.

Wen’s trip was planned long before the recent ructions over Iran, but will also give Beijing an opportunity to consolidate ties with major Arab energy partners, said Lid Gutful, the director of the Center for Middle East Studies at the China Institute of International Studies, a think tank in Beijing.

“Definitely these three countries are major suppliers of oil and gas to China, and how to increase this kind of cooperation would be a major a topic whenever they meet,” said Lid.

Armco said the formal signing of its deal with the Sinopec Group would take place on Jan. 14 in Dharma, the site of the state company’s headquarters.

Under the initial agreement, Aramco will hold a 62.5 percent stake in the joint venture formed to develop the project, and Sinopec will own the rest. Sinopec is the parent of top Asian refiner Sinopec Corp .

Saudi Arabia is already China’s top international source of crude oil. In the first 11 months of 2011, it supplied China with 45.5 tonnes of crude, a rise of 12.9 percent over the same period in 2010. Angola and Iran were the second and third biggest suppliers.

Qatar is a major supplier of liquefied natural gas (LNG) to China, and in the first 11 months of 2011 it shipped 1.8 million tonnes of LNG to China, a rise of 75.9 percent over the same period in 2010.

But Lin, the professor from Xiamen University, said China would not be turning solely to other Middle Eastern countries, which might also be vulnerable to regional tensions, to bolster any downturn in crude orders from Iran.

“We certainly can’t simply rely on other Middle Eastern countries,” he said. “To cope with the Iran problem, we’ll probably have to draw more on orders from countries around China, and not just the Middle East.” (By Chris Buckley)

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