China Replies: No New Sanctions Against Iran

China has replied to President Bush’s request for a tougher global stand against Iran. Sinopec, the Chinese company, today signed a $2 billion contract to develop a supergiant Iranian oilfield called Yadavaran.

The field is impressive, with an estimated 3 billion barrels of recoverable reserves. But the lousy terms show that Iran is still in the driver’s seat. Still insisting on fixed profit rather than the industry-standard big-risk-big-possible-reward formula, Iran gave Sinopec just a 14.98% rate of return.

In addition, production will be extremely slow. The contract calls for just 185,000 barrels a day. By comparison, the BP-led developers of next-door Azerbaijan's offshore – which contains just under twice Yadavaran's reserves – plan to ship 1.5 million barrels a day when it’s at maximum production in the next decade.

But the message is clear. The U.S. has lost the punch of its main claim against Iran – that it’s trying to build a nuclear bomb; a fresh intelligence estimate says that Tehran stopped doing so four years ago. So that has made it difficult for Bush to step up the isolation of Iran in what he asserts is the best way to get it to halt its enrichment of uranium.

China’s action shows that Iran will find ways around the western embargo.

Photo: Leithcote
Rights: Creative Commons