US wants more oil exports -- to China

by Jay Solomon

The Obama administration is encouraging key Arab states to boost oil exports to China in order to reduce Beijing's reliance on Iranian energy and pare Chinese resistance to tougher sanctions over Tehran's nuclear program.
The administration's strategy has yielded a gain: in a step coordinated with Washington, the United Arab Emirates recently agreed to boost oil exports to China to between 150,000 to 200,000 bpd from a current level of 50,000 over the next six months, according to US and Emirati officials. A senior Emirati official said Abu Dhabi plans to make a significant additional increase "within the next three years."

Saudi Arabia, long at odds with Tehran, also appears prepared to offer China more oil to make up for any losses it incurs as part of an international effort to punish Iran, according to people familiar with Saudi thinking. Many diplomats and Middle East analysts are sceptical that the US and the Arab states will succeed over the long term in breaking Beijing's reliance on Iranian energy.
Beijing is the second-largest buyer of Iranian oil. The Asian giant has pledged tens of billions of dollars in new investment in Iran's oil and gas infrastructure in coming years. Chinese Premier Wen Jiabao damped US hopes for broad cooperation on Iran, praising Beijing's "widened and deepened" relationship with Tehran following a meeting with Iranian Vice President Reza Rahimi.

Beijing also views Iran as a crucial partner in helping China achieve energy independence. China is investing in massive joint exploration, extraction and refining projects in Iran.
Oil-industry analysts note that many of China's energy ventures in Iran have yet to bear fruit, due to technological deficiencies and contract disputes. But Beijing is still seen as unwilling to turn its back on opportunities to develop China's own refining and extraction capabilities.