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China Rushes to Complete $100B Deal With Iran

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PostPosted: Fri Feb 17, 2006 6:04 pm    Post subject: China Rushes to Complete $100B Deal With Iran Reply with quote

China Rushes to Complete $100B Deal With Iran

By Peter S. Goodman
Washington Post Foreign Service
Friday, February 17, 2006; 3:42 PM

SHANGHAI, Feb. 17 -- China is hastening to complete a deal worth as much as $100 billion that would allow a Chinese state-owned energy firm to take a leading role in developing a vast oil field in Iran, complicating the Bush administration's efforts to isolate the Middle Eastern nation and roll back its nuclear development plans, according to published reports.

The completion of the agreement would advance China's global quest for new stocks of energy. It could also undermine U.S. and European initiatives to halt Tehran's nuclear plans, muddling Beijing's relations with outside powers.

Caijing, a respected financial magazine based in Beijing, reported on its Web site Thursday that a Chinese delegation comprised of officials from the National Development and Reform Commission -- a top economic policy body -- intends to visit Iran as early as next month to conclude an agreement. The deal would clear China Petrochemical Corp., also known as Sinopec, to develop Iran's Yadavaran oil field.

Beijing and Tehran are attempting to swiftly conclude a deal in the next few weeks, ahead of the possible imposition of international sanctions against Iran, according to a report published in Friday's editions of the Wall Street Journal. The report relied upon unnamed Iranian government officials. Sanctions could entangle Chinese investments inside the country.

Chinese officials declined to comment, and calls to Sinopec's offices went unanswered. In a written statement, the Iranian Embassy in Beijing asserted that the two nations have been working together on energy development, "following the rule of mutual benefits and respect in all bilateral cooperation."

A deal would cement a memorandum of understanding signed by China and Iran in October 2004. The framework agreement pledges that Sinopec will develop the Yadavaran field in exchange for the purchase of 10 million tons of liquefied natural gas a year for the next quarter-century.

Analysts in China said the deal should primarily be seen as part of Beijing's global reach for new energy stocks to fuel its relentless development -- a drive that has in recent years led Chinese companies to invest in Indonesia, Australia, Venezuela, Sudan and Kazakhstan. China is now locked into a high-stakes competition with Japan for access to potentially enormous oil fields in Russia.

But the speed with which China and Iran are now moving to conclude their agreement and begin development appears to signal Beijing's intent to limit the United States-led drive for potential sanctions against Iran to curb what Washington describes as a rogue effort to develop nuclear weapons.

As one of the five permanent members of the U.N. Security Council, China has the ability to veto a sanctions proposal within the international body, or at least threaten to do so to restrict the bite and breadth of such an initiative.

"The timing is really interesting," said Shen Dingli, an international relations expert at Fudan University in Shanghai. "China and Iran appear to be collaborating not only for energy development but also to increase the stakes in case sanctions are imposed. This is a subtle message that even if sanctions are passed, you could have limited sanctions without touching upon oil. China is saying, 'This is my cheese. Don't touch.' "

China's voracious appetite for energy is increasingly guiding its foreign policy. China has used the threat of a Security Council veto to limit sanctions against Sudan, the African nation in which China's largest energy firm, China National Petroleum Corp., is the largest investor in a government-led oil consortium. China is the largest buyer of Sudan's oil, as well as the largest supplier of arms to its ruling regime. The Sudanese government has been accused of massacring villagers to clear land for further energy development and of committing genocide in its efforts to crush separatist rebels in the western region of Darfur.

China's pursuit of a completed energy deal with Iran comes as Tehran has announced the resumption of its uranium enrichment program. Tehran says this work is merely aimed at generating energy, while the Bush administration asserts it is a precursor to the development of nuclear weapons and has been lobbying its allies to take a hard line while threatening sanctions.

China has joined the international chorus in urging Tehran to halt its nuclear plans. But China's aggressive pursuit of an oil deal with Iran underscores how energy security has become a paramount concern for Beijing at a time of relentless industrial growth. Government forecasts show China's demands for imported crude oil swelling from about one-third of its total needs to about 60 percent by 2020.

Analysts assume that the Iranian field could produce as much as 300,000 barrels of oil per day, making it one of the larger overseas operations for a Chinese company. Sinopec would hold a 51 percent stake in the Yadavaran project, according to the Caijing report, while India's Oil and Natural Gas Corp. would hold 29 percent. The rest of the venture would be divided among Iranian companies and perhaps other outside investors.

Information from the Associated Press was used in this article.
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PostPosted: Fri Feb 17, 2006 7:02 pm    Post subject: Bill would keep servers out of China Reply with quote

Bill would keep servers out of China
By Jim Hopkins, USA TODAY

Source: http://www.usatoday.com/money/world/2006-02-12-china-net_x.htm

SAN FRANCISCO — Free-speech advocates have blasted Google and other Internet companies for bowing to China's demands that they censor or fork over information the communist government deemed objectionable.

A partial screen shot of Google.cn's search returns on the words "Tiananmen Square":

Now, Congress is stepping in with proposed legislation that could hobble the companies as they plunge deeper into one of the world's hottest economies. This is Round 2 for Congress. Last year, it scrutinized and slowed other business deals with ties to China's government among oil companies and computer makers.

Rep. Chris Smith, R-N.J., is drafting a bill that would force Internet companies including Google, Yahoo and Microsoft to keep vital computer servers out of China and other nations the State Department deems repressive to human rights. Moving servers would keep personal data they house from government reach. But that also could weaken the firms' crucial Internet search engines. (Related: AOL tries to speak Chinese.)

Smith's bill — still being written — has already drawn interest from another lawmaker, Rep. Dana Rohrabacher, R-Calif., with long-held concerns about U.S. business cozying up to the Chinese government. "This is greed in high technology, and it's not a pretty sight," Rohrabacher says.

Smith has scheduled a Wednesday hearing on the issue, which Google, Microsoft, Yahoo and Cisco Systems will attend. He is unmoved by their stance that conducting business in China in limited ways will better nurture human rights than abandoning the nation of 1.3 billion altogether.

If anything, Smith says, China's human rights record has slipped, even as more U.S. companies pile into the country. "It's gotten worse," he says.

China deals have hit snags

A congressional hearing Wednesday on U.S. Internet companies operating in China won't be the first time the White House and Congress probed business deals tied to the Chinese government.
Recent cases illustrate potential pitfalls:

Unocal deal

Last summer, Congress objected to Chinese oil company CNOOC's plan to buy Unocal, the U.S. oil company, because of concerns CNOOC was 70% owned by the Chinese government.

CNOOC, citing the political uncertainty, abandoned its bid, even though it was nearly $1 billion higher than the eventual winner, U.S oil giant Chevron.

IBM deal with Lenovo

Also last year, Congress fretted about IBM's plans to sell its PC division to a Chinese company, Lenovo, in which the Chinese government owned a stake.

Rep. Don Manzullo, R-Ill., worried that Lenovo could use its government backing to undercut U.S. PC makers. And he was concerned that the proximity of Lenovo's offices to IBM's could foster espionage.

The Lenovo deal went through, but only after getting blessed by the Committee on Foreign Investment in the United States (CFIUS). The Treasury Department panel examines deals raising U.S. security concerns.

Global crossing deal

Rep. Dana Rohrabacher, R-Calif., citing national security concerns, fought plans by fiber-optic giant Global Crossing to sell majority control four years ago to a group that included an investor with ties to the Chinese government. Global eventually restructured the deal to appease CFIUS.

Rohrabacher isn't convinced by Internet company statements that abandoning China would be worse than cooperating with the government in limited ways.

"They can claim to be well-motivated all they want," he said. "I'll believe that when they give their profits to the democratic movement in China."

Google last month launched Google.cn, a version of its No. 1 search engine that prevents Chinese residents from seeing, for example, photos of tanks confronting Tiananmen Square protesters in 1989. Also last month, Microsoft acknowledged shutting down a blog run by a Chinese journalist critical of the government.

Last fall, Yahoo acknowledged giving information to Chinese officials that led to a 10-year prison sentence for a journalist accused of divulging state secrets. Last week, Reporters Without Borders, a journalism group critical of Yahoo's cooperation with Chinese officials, accused it of working with the Chinese government in another case that led to a dissident being jailed. Yahoo said it was unaware of the case.

The companies say they are unhappy with the restrictions yet must honor local laws.

Smith asked Cisco to attend because he wants to learn more about how its network hardware might be used outside the USA to help repressive governments ferret out dissidents.

Cisco says it does not cooperate with governments for such uses, though it notes the hardware "can be used for many different purposes."

Smith's bill would also establish codes of conduct for Internet companies operating in repressive regimes. It would set export controls for technology such as website filtering devices that can limit free speech. And it would create a State Department office to investigate suspected persecution of Internet users in foreign countries.

Smith, a member of Congress since 1981, is vice chairman of the Committee on International Relations, which oversees the State Department.

Smith's legislation isn't a slam-dunk. If it gets as far as a vote in the House, "every business interest" will jump in, says David Brady, a professor of political science at Stanford.

"It's not just a Yahoo issue," says Michael Callahan, a Yahoo attorney. "It's all international firms operating in China."

Google draws attention

Internet companies, like virtually every other business, are racing to China's sizzling economy. Its gross domestic product, the combined value of its goods and services, is expected to rocket 8.2% this year from 2005, vs. 3.3% growth in the USA, says the International Monetary Fund.

Google's China site launch drew more attention than steps taken by its rivals for reasons that have broadly made it into an inviting target.

The company's founders laid out a widely publicized "don't be evil" pledge when they took the company public. That set it up for even closer scrutiny, Brady says. And it gave critics of the China website an entrée. Soon after its launch, opponents of China's control of Tibet waved signs saying "Google Don't Be Evil" outside the company's headquarters in Silicon Valley's Mountain View, Calif.

Google's site launch came days after it rebuffed a U.S. Justice Department subpoena demanding that it turn over data on how millions of users search the Internet.

In contrast, Yahoo, Microsoft and America Online all cooperated with Justice.

Google's leadership in online search and its lofty stock price have generated worldwide headlines, transforming it into one of the globe's most powerful corporations. But now, amid the Justice subpoena, the China launch and investor angst about e-commerce prospects, Google shares have lost nearly 25% from their high. They closed Friday at $362.61, up $3.84 a share, after sprinting to a record $475.11 high last month.

Forced compromise

Google says its China site tackles problems Chinese users have with Google.com, which is unavailable about 10% of the time there. When working, it is often slow. The Google News service is rarely available, and Google Images — a storehouse that includes the Tiananmen Square photos — is down half the time.

Google blames those problems on the fact that its servers are now housed outside China, crimping response time as users reach sometimes thousands of miles to servers in the USA. Accepting government content limits meant Google could win a license to operate within China and locate servers there, says Senior Policy Counsel Andrew McLaughlin.

But it was a compromise. "We are not happy about government restrictions on access to information, and we hope that over time everyone in the world will come to enjoy full access," he told the Congressional Human Rights Caucus in a statement for a briefing earlier this month.

In any case, the company's uncensored Google.com will still be available to Chinese citizens.
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PostPosted: Tue Feb 21, 2006 6:23 pm    Post subject: In Russia and China, We Trust? Reply with quote

In Russia and China, We Trust?

February 21, 2006
The Wall Street Journal
Review & Outlook


In two years of fruitless negotiations with the Europeans, Iran won precious time to work on the world's first Islamist atomic bomb. Yesterday, the diplomatic two-step moved to Moscow with the full blessing of an "international community" apparently willing to keep engaging the mullahs in open-ended negotiations. The West, it seems, is now putting its future security in the hands of Russia and China.

This week's talks center on a Russian plan to enrich uranium, send it to Iran, collect the spent fuel and reprocess it in Russia. Moscow claims that will stop the mullahs from enriching uranium to bomb-grade levels. A former Russian prime minister and current head of the nuclear agency RosAtom, Sergei Kiriyenko, said in a Newsweek interview last week that if Tehran goes along with the idea, "there will be no danger that the development of atomic energy in Iran . . . will become a proliferation threat." China, a fellow permanent member of the United Nations' Security Council, also supported the plan, too, alongside the EU and U.S.

Those assurances are hardly convincing, even if Iran decides to play some version of Russia's game. Tehran's new president, Mahmoud Ahmadinejad, last year categorically ruled out ceding any controls over the nuclear enrichment process but then put the option back on the table to divide the world powers. Tehran canceled the Moscow round, rescheduled, canceled, finally turned up in Moscow yesterday, and then hinted that it may continue enriching uranium, even if a deal is reached.

Future delays are to be expected since the Iranians seem happy to use any diplomatic "process" to gain time to pursue their nuclear ambitions unmolested by threat of U.N. sanctions, or worse.

China has ample reasons to drag things out, too. As we type, Beijing is toiling hard to clinch a multi-billion-dollar deal to develop an Iranian oil field in exchange for a 25-year contract for liquefied natural gas. China's oil majors have already invested in Iran to obtain fuel for the mainland's red-hot economic growth.

Let's make a big assumption, though, that Iran's leaders were taken back by the rare show of resolve at the International Atomic Energy Agency, which last month found the courage to refer Iran to the Security Council. And let's say they sign a deal with Moscow. But must we then assume that Iran will quietly shut down all those centrifuges at Natanz and elsewhere they've already installed for weapons-grade enrichment? And who can trust Russia to run the program competently and cleanly? Recall that the biggest beneficiaries of the Oil for Food payments handed out by Saddam Hussein were in Moscow.

So why is so much political capital vested in this newest stab at negotiation? Well, the other option, the referral to the Security Council followed by possible economic sanctions, isn't very attractive either, given the failures of U.N. sanctions in the past. Its main merit would be to clarify the choices before the "international community."

We would then find out if China and Russia would choose to wield their veto power in the Security Council if sanctions against Iran were proposed by the U.S. With their commercial ties to Iran, they've made plain their reluctance to support any serious action against the regime, and are busy trying to play down the threat of any sanctions. President Vladimir Putin earlier this month in Madrid even insisted that Iran wasn't "referred" to the Security Council by the IAEA, a semantic distinction of some sort. China's foreign ministry spokesman Qin Gang cooed in a press conference on Thursday that Beijing advocates "peaceful resolution of the Iran nuclear issue through diplomatic negotiations."

So long as Tehran's nukes don't physically threaten China, Beijing's leaders will remain reluctant to endanger their investments in Iran. It's not clear, however, that Moscow will always toe that line. Influential Putin advisers say that the new Iranian rulers have annoyed them with all that fiery rhetoric about wiping Israel off the map. The Kremlin has been embarrassed, too, by Iran's hot-cold response to the Russian diplomatic initiative to reprocess uranium. The offer had been constructed with a view to improving Moscow's reputation in the West, tarnished by backsliding on democracy at home in recent years.

The reality of a nuclear Iran is also starting to resonate with the Russian public. An RTV newscaster recently pointed out that "The radius of existing Iranian missiles extends not just to Israel, but to Volgograd, Astrakhan and Samara." In the oil- and gas-rich Caspian basin, Russia and Iran are competitors for contracts and influence. A recent commentary in the business daily Kommersant accused the Kremlin of letting itself be "manipulated" and "blackmailed" by the mullahs. Some people in Russia belatedly realize that Moscow's skills at political maneuvering may not be working as well as expected with the mullahs.

National security interests ought to lead Russia to take a dim view of Iran's nuclear ambitions. But the Kremlin clings to the idea that it can employ the mullahs for its own purposes. As with China, a "special relationship" with Iran was built on common commercial interests and a shared dislike of American power. The Russian nuclear industry, desperate for markets for its Chernobyl-style reactors, is finishing construction of Iran's nuclear power plant at Bushehr and hopes to build others. The other vibrant Russian export to Iran -- as with China -- is arms, including missile contracts that Mr. Putin isn't eager to give up.

All this presents a hard reality for the West. As long as the autocrats in Beijing and Moscow nurture close ties with a regime that's no friend of the free world, Washington or any European capital cannot place any serious hopes on Russia or China to talk Iran out of building a nuke. No negotiations with Iran, or any rogue state, can ever hope to achieve success without credible threats being brought to bear. Therein lies the problem for the West, a puzzle the Bush administration surely understands. If the Russian scheme or even U.N. sanctions can't deter the mullahs, the world is running out of remedies.

That leaves the military option, which if used would no doubt produce a global outcry fanned by Russia and China -- and perhaps the French as usual. But it should be made clear to Russia and China that they too would pay a price if they force the West into drastic measures. China is far more dependent on Western trade than on Iranian fuel and Russia needs Europe's good will. The time is approaching when everyone may have to make a tough choice between business and diplomacy as usual and the existential threat posed by Iran.
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