China’s Cool Hand Game
China‘s plan to survive and thrive amid the Barack Obama administration’s Iran sanctions drive appears to be on track – albeit with more than a little public diplomatic cost and humiliation.
China’s tactics have the potential to weaken sanctions at the national as well as the United Nations level. Therefore, Beijing may still earn the grudging gratitude of Iran – and even the United States, whose push to extend sanctions it has agreed to support.
When the sanctions drive was threatened by the fuel swap agreement between Iran, Turkey and Brazil (hereinafter the ITB swap) China gritted its teeth and, instead of supporting this dramatic and apparently genuine exercise in developing-world diplomacy, undercut it by acquiescing to Washington’s rushed riposte: the announcement that a draft sanctions resolution approved by the "Iran Six" would be circulated to the Security Council.
To observers who expected China to champion the rights and interests of nations outside the Western bloc, it was not a pretty picture. The resolution announcement incensed Brazil and Turkey, two natural allies in China’s plans for a new, post-US world order.
Iran’s reaction to China’s actions has been muted, even though Foreign Minister Manouchehr Mottaki was reportedly thunderstruck when a Reuters correspondent told him about the resolution announcement on May 19 in Dushanbe, Tajikistan.
Within China, indignant netizens employed salty language to excoriate China’s capitulation to the United States – and its wordy, parsing efforts to justify the government’s actions.
One aggrieved commenter wrote: "’So, you want to live like a whore and then have a ceremonial arch erected to commemorate your chastity! Don’t think the Chinese people don’t understand what’s going on!”
As China’s Foreign Ministry reached out to Turkey and Brazil to praise the fuel swap deal and repair China’s standing in the developing world, two complementary editorials in China’s influential Global Times – one in English for a Western audience and one in Chinese for everybody else. These laid out Beijing’s case and labored to salvage China’s public image as an independent and principled world power.
At the same time it was made clear that China was not going to attempt to exploit the ITB swap announcement in order to embarrass the United States and decouple from the sanctions drive.
In fact, the editorials laid out a position comforting to the United States: that more than the fuel swap agreement was needed if Iran wished to avoid sanctions.
The English-language editorial stated:
Should Iran really make up its mind to break the long impasse, more substantive steps are needed before the rest of the world can be more convinced.
Implementing the fuel-swap deal is certainly one option for Tehran to assure the world of the sole peaceful purpose of its nuclear program.
There are more feasible options available. Iran’s claims of trustworthiness will be more persuasive if greater transparency is given to its nuclear program.
Tehran would be shortsighted and unwise if it merely manipulated the fuel-swap deal as a tactic to stave off more UN-led sanctions.
… it is the choices up to Iran that can make peace a reality in the region. 
The Chinese-language editorial, while criticizing US intransigence, stated:
Iran has not made sufficient efforts for foreigners to believe her.
In principle, the agreement announced two days before … is a good thing. But it is not enough to remove the suspicion … additional actions are necessary … If Iran wants to break this deadlock, it has to take concrete actions and prove to the world that none of its activities have anything to do with nuclear weapons. 
The Western media profess to believe that Chinese support was extorted by threats to come down hard on China on the issues of currency valuation and the Cheonan, the South Korean warship which Seoul claims was sunk by a North Korean torpedo.
However, it appears that the situation leading up to the sanctions resolution announcement on May 18 was quite the opposite.
The Obama administration, desperate to keep the ITB swap deal from derailing the sanctions push, was forced to finalize its negotiations with Russia and China in conditions that can charitably be described as adverse.
Russia and China were in the position to make demands – and they did, as the New York Times reported:
Among the many compromises that the United States accepted to get China and Russia to back new sanctions against Iran was an agreement to limit any reference to the bank – or Iran’s entire energy sector, for that matter – to the introductory paragraphs rather than the sanctions themselves, according to American officials and other diplomats, yielding a weaker resolution than the United States would have liked.
The standoff between Washington and Beijing over what economic measures to include in the final resolution consumed the last 10 days of the negotiations, diplomats said. 
Now, UN sanctions appear inevitable – thanks to China.
However, China would harbor no illusions that the UN draft resolution would be the last word on sanctions.
China’s support of UN sanctions are best understood in the context of the real sanctions – national and EU sanctions to be imposed on Iran’s allies and trading partners after the UN sanctions pass.
It has not escaped the notice of China nor Iran that the US media routinely state that negotiations with Russia and China have diluted the UN resolution to the point of meaninglessness, and only follow-on sanctions can achieve the desired results.
Since the UN sanctions are universally regarded as a necessary precondition to national sanctions, it would appear counterintuitive for China to surrender its leverage over UN sanctions by spurning the ITB swap – which provided adequate pretext for slow-walking the UN sanctions process – and, in the Global Times editorial, even placing additional, seemingly unmeetable demands on Iran beyond the swap as a condition for halting sanctions.
Beijing’s cooperation, including an acknowledgement that the sanctions vote would occur within three weeks – even under favorable negotiating conditions when it could conceivably have demanded that the UN sanctions process wait on the outcome of the ITB swap – implies that Beijing and Washington achieved an understanding concerning US national sanctions as well.
Immediately following the announcement of the UN draft, Global Times printed a long, self-justifying background piece by "a knowledgeable party at China’s UN Mission in New York".
At a time when one would think China would be at pains to describe the draft as something forced on it by the United States, the unnamed source goes out of his or her way to describe the weeks of intensive negotiations and 20 bilateral meetings between the US and Chinese representatives that culminated in the draft resolution which it endorsed, with the unequivocal statement: "we have no objections to the draft".
The source lays out the principles underlying China’s agreement to the sanctions process, with the apparent intention that these painstakingly-negotiated conditions should be binding on the US as well as China.
These should be understood as a signal that China is asserting that the US must observe these principles not only for the drafting of the UN sanctions but in the execution of American national sanctions.
The key economic points, as described in the Global Times backgrounder:
China’s important interests are maintained. China’s important interests are … in the matters of Iran’s energy, trade, and financial sectors. China believes that normal economics and trade should not be punished because of the Iran question nor should those countries that maintain normal, legal economic relations with Iran be punished … Through negotiations, this point was satisfied, doing a relatively good job of upholding China’s … important interests. 
These remarks – and the remarkably forthright support for the American sanctions position reflected in the Global Times editorials – can therefore be construed as Beijing’s public affirmation of the deal China made with the Obama administration to keep national sanctions in check.
As noted above, at China’s insistence, references to Iran’s financial and energy sectors were banished to the beginning of the draft resolution, instead of being referenced in the articles outlining actual sanctions – thereby removing the potential justification that harsher US national sanctions were necessary in order to implement the UN security council resolution mandate.
For its part, the US engaged in spinning of its own to avoid the impression that it had given away the store during the rushed weekend negotiation.
On the issue of Russia’s key military sale to Iran – the S300 anti-aircraft battery that is supposed to give Israel conniptions – the US told its sources that the sale would be banned. The Russians went public with a statement that they could sell it.
As for the concessions to China, US sources took pains to assert that the Iranian finance and energy sector was still fair game:
That is enough to pursue companies dealing with either the banks or the energy sector, American officials said. Whenever the negotiations stalled, Ambassador Susan E Rice, the American envoy, warned the Chinese that any measures passed by Congress in the absence of a United Nations resolution would likely have much greater consequences for Chinese banks and its trade relations with the United States, one United Nations diplomat said. 
However, a close parsing of this paragraph seems to indicate that China actually did get what it wanted: Beijing’s interests will be targeted if – and only if – China doesn’t back the UN sanctions resolution.
Once the Security Council resolution is out of the way, US national sanctions are coming, as a matter of domestic political necessity and, perhaps, the Obama administration’s attempt to entice Israel into the faltering non-proliferation regime by isolating and incapacitating Iran.
Maximum US national sanctions go far beyond the UN – by design.
Pounding on Iran and supporting Israel are a matter of great importance in the US Congress.
A bipartisan Iran sanctions bill – HR 2194: Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2009 – represents the latest iteration in the so far futile pursuit by congress of the sanctions holy grail – a shut down of every global loophole that lets Iran fund its energy development, export oil, and import gasoline.
The bill has been passed by overwhelming majorities in both houses in slightly different forms and is now in the hands of a conference committee that will produce the final bill for Obama’s signature.
Whether or not the bill includes an explicit exemption for "cooperating countries" (aka China and Russia) as requested by the White House and absolutely detested by pro-Israel and anti-administration hardliners, Obama will have the final discretion in determining what sanctions to apply, and to whom.
And it appears that it will be very difficult for Obama to sanction China after Beijing’s full-throated and politically costly support for UN sanctions.
That in turn may render moot the vaunted US sanctions against countries and companies involved in Iran’s energy sector and supplying gasoline.
If US companies are sanctioned and China is not – and, under the draft UN sanctions resolution, presumably the maximum that China will accept, Beijing has no obligation to engage in energy and finance sector sanctions – Iran will suffer minimal disruption, China will accrue the maximum benefits, and American companies will be the losers.
If the United States threatens to unleash Stuart Levey, the US under secretary for Terrorism and Financial Intelligence, and Treasury hounds on Chinese banks doing business with Iran, the Obama administration can expect, if not open defiance, a rapidly increasing interest by Beijing in developing-world diplomatic initiatives to defuse the Iran crisis that undercuts the rickety sanctions edifice.
If, on the other hand, the Obama administration and Secretary of Defense Robert Gates are less interested in pursuing dead-end sanctions than they are in creating the geopolitical space to continue negotiations with Iran over its nuclear program, China’s resistance may provide a welcome excuse for moderating the sanctions regime and preventing a slide into confrontation.
In any case, China, by coming – and staying – on board the sanctions bandwagon on its own terms, makes it much more likely that national as well as UN sanctions will be less stringent than Iran’s most ferocious adversaries hope.
This background is perhaps the best explanation of why Iran’s public criticism of China’s participation in the UN sanctions resolution exercise has been virtually non-existent.
China on the inside of the sanctions regime is a much more effective bulwark against aggressive, disruptive sanctions than it could be standing alone with Iran against the US-led campaign.
PETER LEE is a business man who has spent thirty years observing, analyzing, and writing on Asian affairs. Lee can be reached at peterrlee-2000@yahoo.
A version of this article appeared in Asia Times.
1. Iran nuclear issue demands careful handling, Global Times, May 20, 2010.
2. Click here, in Chinese.
3. Sanctions Effort May Open Door to Press Iran Central Bank, New York Times, May 19, 2010.
4. Click here, in Chinese.
5. Sanctions Effort May Open Door to Press Iran Central Bank, New York Times, May 19, 2010.