Friday, February 17, 2006


China Rushes to Complete $100B Deal With Iran

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, possibly generating friction in Beijing's relations with outside powers.
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 moving to conclude their agreement and begin development appears to signal Beijing's intent to limit the United States-led drive for sanctions against Iran to curb what the Washington describes as Tehran's rogue effort to develop nuclear weapons.

As one of the five permanent members of the U.N. Security Council, China can 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.

Not just predictable. Predicted, more or less:
Put together the contraction in supply and the growing ability of China to control some of that supply, and you get a taste of the cataclysm that will follow when China's growing productivity and affluence really go toe-to-toe with our oil addiction. China, which may be less than a true free market at home, has no problem bitch-slapping us with Adam Smith's invisible hand at the most macro level. So it seems rather obvious that China will flex its growing muscles and buy its own secure supply by bidding on bigger and bigger helpings of Big Oil.

Folks killing themselves or each other over cartoons in newspapers is irrational. Iran deciding to sell its oil to China, and thereby picking up a perfect shield against all but purely unilateral strikes from the U.S.? Inspired rationality.

Last month King George said we are addicted to oil. This is going to increase the cost of our fix quite a bit.


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