China and Iran relations

01/11/2007

“…Iran is a consistent market for China’s exports and supplier

for its growing energy demand. China is involved with Iran’s
energy sector in everything from oil exploration and drilling to
pipelines…”

Backgrounder by Realit-EU

Relations between China and Iran date back many centuries.

Pre-Islamic Persian dynasties such as the Parthians and
Sassanids had various contacts with China. In Islamic times, the
two countries were connected by the Silk Road. China and Iran
established diplomatic relations on August 16, 1971. 1

Economic Ties

Iran is a consistent market for China’s exports and supplier for

its growing energy demand. China is involved with Iran’s energy
sector in everything from oil exploration and drilling to
pipelines.

However, China’s engagement with Iran extends far beyond

energy, with more than 100 Chinese companies working in Iran
in sectors such as dam construction and shipbuilding, steel
production, and airport and seaport development.

Ali Akbar Saheli, Iran's former representative to the

International Atomic Energy Agency, said the two countries
“mutually complement each other. They have industry and we
have energy resources.” 2

Iran has observer status, and aspires membership to, the

Shanghai Cooperation Organization, a mutual security
organization formed between China, Russia and several other
countries of the former Soviet Union, in which China has a
leading role. 3

Iran is is confident in the growing support it has been receiving

from China. In July 2004 Iran’s parliamentary speaker Gholam
Ali Haddad-Adel stressed China's support for Iran’s nuclear
programs. 4

Trade between Iran and China has grown quickly, increasing

from $1.2 billion in 1998 to about $10 billion last year. 5
Iran is the second largest oil exporter to China after Saudi
Arabia, exporting around $5.8 billion in crude oil along with
petrochemical products. 6

At the same time China was the second largest exporter to Iran
in 2005, with 8.3% of the total market, and those exports rose
360% from 2000 to 2005 for economic and strategic reasons. 7

As for specific projects, in March 2004 China’s state-owned oil

trader Zhuhai Zhenrong Corporation signed a $20 billion (R133
billion) deal to buy more than 110 million tons of liquefied
natural gas (LNG) from Iran over 25 years, according to
company and press reports. The deal will begin with a purchase
of 2.5 million tons of LNG from Iran in 2008, rising to 5 million
tons per year by 2013. 8

In October 2004 China’s state-owned Sinopec Group signed a

$100 billion agreement with Iran to develop the Iranian
Yadavaran oil field, which will produce an expected 300,000
barrels of oil per day over a 25-year period. In April 2007 Iran’s
oil minister Kazem Vaziri-Hamaneh said a final deal was very
close. 9 Sinopec would assume a 51% stake in the Yadavaran
field, with 29% going to India's Oil and Natural Gas Corporation
(ONGC) and the remaining 20% to either Iranian firms or
another foreign company such as Royal Dutch Shell. 10

Military Ties

China has played a key role in Iran's missile development, with

exports and assistance dating back 20 years. China’s exports
and assistance to Iran generally fall into two areas: provision of
anti-ship cruise missiles and related technology and technical
assistance for Iran's ballistic missile program, as well as some
exports of complete ballistic missiles. 11

China began exporting missiles to Iran in 1985 during the Iran-

Iraq war, when China supplied weapons and military technology
to both sides. 12

In 1986-87 China reportedly transferred HY-2 (Silkworm) anti-

ship cruise missiles to Iran, prompting the United States to
issue a protest to Beijing and to temporarily freeze American
liberalization of high-technology exports to China. 13

In 1989 China also sold between 150 and 200 M-7/8610 ballistic
missiles to Iran. 14

China reportedly assisted Iran's efforts to upgrade its North

Korean Scud missiles and has supplied technical and
manufacturing assistance to a number of indigenous Iranian
missile programs, including the Iran-130 (aka Mushak-120),
Iran-700, NP-110, and Zelzal-3.

In 1996, when media reports stated that China had transferred

advanced C-802 anti-ship cruise missiles to Iran that could
trigger U.S. sanctions under the 1992 Iran-Iraq Nonproliferation
Act, China vigorously denied the allegation. 15

In 1996 China reportedly began helping Iran develop indigenous

anti-ship cruise missiles based on Chinese designs.

In August 1996 China and Iran signed a $3 billion deal that

included the sale of Chinese ballistic missiles, missile guidance
technology (including sensitive gyroscopes), and missile
production equipment, according to a CIA report. 16

Under U.S. pressure, however, China began to curb its missile

cooperation with Iran. On January 20, 1998, U.S. Defense
Secretary William Cohen received personal assurances from
Chinese President Jiang Zemin and Defense Minister Chi Haotian
that China had halted transfers of anti-ship cruise missiles to
Iran and Beijing would not help Iran to upgrade its current
cruise missile inventory. 17

Iran and North Korea reportedly had worked together to

improve the accuracy of the Chinese C-802, an anti-ship cruise
missile with a range of 80 miles that Iran bought from China
from the mid-1990s. Tehran purportedly took delivery of about
150 C-802 missiles. However, China suspended the C-802 sale
under U.S. pressure. 18

In another development, The Washington Times reported that

China signed an $11-million contract with Iran to upgrade Iran’s
FL-10 anti-ship missile. 19

In April 2004 despite China's application to join the Missile

Technology Control Regime, (a voluntary group of 34 countries
that share the goal of non-proliferation of unmanned delivery
systems capable of deliverying weapons of mass destruction)
the State Department sanctioned five Chinese companies,
including Norinco and the China Precision Machinery
Import/Export Corporation, for transferring cruise and ballistic
missile components and technology to Iran.

In August 2007 the leaders of China and Iran, along with Russia,
said that Central Asia should be left alone to manage its
stability and security, in an apparent warning to the United
States to avoid interfering in this strategic, resource-rich region.
The threat came at a meeting of the Shanghai Cooperation
Organization. 20
--------------------------------------------------------------------------------

1. http://www.icocic.net/events.html

2. http://www.washingtonpost.com/wp-dyn/articles/A55414-
2004Nov16.html

3.
http://www.cfr.org/publication/10883/rise_of_the_shanghai_coop
eration_organization.html

4.
http://www.parstimes.com/opinion/2005/iran_nuclear_ambitions
.html

5.
http://www.washingtonpost.com/wpdyn/content/article/2006/02/
17/AR2006021702146.html

6. http://www.payvand.com/news/06/jul/1078.html

7. http://www.payvand.com/news/06/may/1046.html

8. http://www.busrep.co.za/index.php?
fSectionId=613&fArticleId=377684

9. http://www.iht.com/articles/2007/04/09/business/chioil.php

10. http://www.pinr.com/report.php?
ac=view_report&report_id=456&language_id=1

11. http://www.nti.org/db/china/miranpos.htm

12. http://www.nti.org/db/china/miranpos.htm

13. Shirley A. Kan, “Chinese Proliferation of Weapons of Mass

Destruction: Current Policy Issues,” CRS Issue Brief, October 17,
1996, p. 5; Gordon Jacobs and Tim McCarthy, “China's Missile
Sales—Few Changes for the Future,” Jane's Intelligence Review,
December 1992, p. 560.

14. Reuters, October 12, 1994; In Executive News Service,

October 12, 1994; Defense News, October 17-23, 1994, p.64;
Douglas Waller, et al., “Sneaking in the Scuds,” Newsweek, June
22, 1992, pp. 42-46; “China Deepens Arms Relationship with
Iran,” Iran Brief, October 1, 1996, p. 2; Gordon Jacobs and Tim
McCarthy, “China's Missile Sales — Few Changes for the
Future,” Jane's Intelligence Review, December 1992, p. 560
15. http://www.nti.org/db/china/mtcrorg.htm

16. The Iran Brief, October 1, 1996, p.4; and December 5, 1996,
p.6; Al-Sharq Al-Awsat (London), August 29, 1996; in FBIS-NES-
96-169, August 29, 1996.

17. “China's President Assures Cohen on Iran Missile Sales,”

Reuter, January 20, 1998; John Pomfret, “Cohen Hails
Achievements In China Visit,” Washington Post, January 20,
1998, p. A-11; Bill Gertz, “China to Halt Missile Sales to Iran,”
Washington Times, January 20, 1998, p. 1; Department of
Defense News Briefing, January 20, 1998.

18. Michael Evans, “Tehran Upgrades Chinese Missile,” The

Times (London), January 11, 2000.

19. Bill Gertz, “China Agrees to Deal With Iran on Missiles,” The
Washington Times, August 19, 1999. p. 1.

20. http://www.washingtonpost.com/wp-
dyn/content/article/2007/08/16/AR2007081601221.html

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