Friday, January 12, 2018

You Like the Iran Nuclear Deal? Thank China

The Chinese Sellout of Iran that Led to the JCPOA Nuclear Deal

Today Donald Trump waived the more onerous US national sanctions against Iran for a few more months.  I suspect he was told reimposition of US national sanctions would be resisted by the EU and China--which had previously supported the Obama administration sanctions drive because it offered a roadmap for readmission of Iran to the so-called "family of nations"--and would not support a sanctions drive that moved Iran diplomacy in the opposite direction.

China, I expect, was a significant factor.  

Not just because Iran would perforce be pushed deeper into the embrace of the PRC by a renewal of Western hostility. 

The PRC has always been recognized as the key to effective Iran sanctions.  The Obama adminstration invested enormous efforts in finessing the China factor as it pushed for UN sanctions against Iran in 2010. 

And it yielded results.  So, like the title says, If You Like the Iran Nuclear Deal, Thank China.

The historical record implies that the Obama administration didn't quite push the Chinese dragon to its knees; it looks like some serious tummy-tickling of the PRC panda was also involved. 

A review of the sanctions campaign against Iran at the UN in 2010 offers an indication of what was and what might have been: a few months at the beginning of the Obama administration when the US saw engaging and haggling with China on Iran as a worthwhile national objective.

Now, the Chinese key to effective Iran sanctions is becoming is becoming less and less accessible.   

Because China, unlike the EU, has a suite of countermeasures to US national sanctions coercion in the financial realm that, though nascent, could be made more effective and robust by implementing them in the relatively friendly battlespace of a sanctions war that most US allies are demonstrably unwilling to support.  

Count the development of a parallel PRC international financial infrastructure  as collateral damage of the US China rollback policy since 2009 and, more recently designating the PRC as an adversary of the "rules based international order" and not a legitimate great power interlocutor. 

For well over a decade, the PRC has been planning and preparing against the oft-brandished US threat of financial warfare via national sanctions, especially in developing economic and financial mechanisms like yuan swaps, internationalization of the RMB, and the long-promised petro-yuan future settlement system to frustrate US efforts to piggyback national sanctions on top of UNSC sanctions.

Since the historical memory of the US foreign policy community is a) selective and b) extremely short, I am reposting this as a reminder that the PRC sellout of Iran was the key element in implementation of the sanctions regime that culminated in the JCPOA agreement.

For a variety of reasons, including the threat of US diplomatic and financial coercion and also because of hopes of inclusion in a US "responsible stakeholder" condominium, the PRC acquiesced in the sabotage of Iran's attempt to dodge UN sanctions via the fuel swap gambit (by which Iran's notionally scary uranium stuff would be processed out-of-country).

The US government and, I suspect, Hillary Clinton took the PRC concession as an indication that the PRC could be rolled, and cooperation on Iran was followed by serial f*ckerai on the Senkakus, South China Sea, &c & ever more determined and capable pushback by the PRC.

May 2010 was perhaps the last gasp of PRC-US national engagement.

The following post originally appeared at Asia Times in May 2010.  It is reprinted with AT's permission here.  For any further reprint permissions, please contact Asia Times.


China Does a Good Job of Playing a Bad Hand on Iran Sanctions

China's plan to survive and thrive amid the Obama administration's Iran sanctions drive appears to be on track--albeit with more than a little public diplomatic cost and humiliation. 

China's canny tactics have the potential to weaken sanctions at the national as well as UN level.  Therefore, it may still earn the grudging gratitude of Iran--and even the United States.

China had agreed to support the U.S. push for UN sanctions. 

When the sanctions drive was threatened by the Iran/Turkey/Brazil fuel swap agreement (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 America's rushed riposte: the announcement that a draft sanctions resolution approved by the P5+1 would be circulated to the Security Council.

To observers that 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-U.S. world order. 

Iran's reaction to China's actions has been muted, even though its foreign minister, Manouchehr Mottaki, was reportedly thunderstruck when a Reuters correspondent told him about the resolution announcement on May 19 in Dushanbe.

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--laid out Beijing's case and labored to salvage China's public image as an independent and principled world power.

But at the same time it made it clear that the PRC 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. is the choices up to Iran that can make peace a reality in the region.

The Chinese-language editorial, while criticizing U.S. intransigence, stated:

Iran has not made sufficient efforts for foreigners to believe her.

In principle, the agreement announced two days 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.(2)

The Western media professes to believe that Chinese support was extorted by threats to come down hard on China on the issues of currency valuation and the Cheonan sinking.

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. (3)

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 or Iran that the U.S. media routinely states 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 knowledgable party at China's UN Mission in New York".

At a time that one would think China would be at pains to describe the draft as something forced on China 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 U.S. and Chinese representatives that culminated in the draft resolution, which it endorsed with the unequivocal statement that "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 U.S. as well as China.

I believe these should be understand 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 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.(4)

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 Chinese 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 U.S. national sanctions were necessary in order to implement of the UNSC resolution mandate.

For its part, the U.S.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.(5)

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, U.S. 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 U.S. national sanctions go far beyond the U.N.--by design.

Pounding on Iran and supporting Israel are a matter of great importance in Congress.

A bipartisan Iran sanctions bill--H.R. 2194: Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2009--represents the latest iteration in Congress's to date futile pursuit of the sanctions Holy Grail--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 President Obama's signature.

Whether or not the bill includes an explicit exemption for "cooperating countries" a.k.a. China and Russia as requested by the White House and absolutely detested by pro-Israel and anti-administration hardliners, President 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 President Obama to sanction China after Beijing's full-throated and politically costly support for UN sanctions.

That in turn may render moot the vaunted U.S.sanctions against countries and companies involved in Iran's energy sector and supplying gasoline.

 If U.S. 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 and the Treasury hounds on Chinese banks doing business with Iran, the Obama administration can expect,if not open defiance, an 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 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 U.S-led campaign.