China could reap the benefits of President Barack Obama’s lifting of sanctions on Iran after the two countries agreed Saturday to increase their oil trade over the next decade.
“China is clearly positioned to enjoy the benefits of sanctions relief,” John Allen Gay, an editorial staffer with The National Interest who covers Iranian issues, told The Daily Caller News Foundation Monday. “Iran’s oil output will go back up and the country is already trying to regain market-share as an oil producer. The Chinese already purchase oil from Iran at a discount, but that discount could be endangered if Iran has more opportunities to sell.”
Iran intends to use Chinese cash to increase oil production. Iran hasn’t seriously invested in its oil sector for years due to international sanctions, and simply restoring previous production levels is estimated to require a minimum of $150 billion in new investment. The number could be as high as $500 billion over the next five years, according to reports by Iran’s state-run news agency.
China is already heavily invested in Iranian oil, according to The New York Times and has been Iran’s largest trading partner for six years in a row. A new influx of Chinese capital could help reinvigorate Iran’s oil industry.
China is largely dependent on imported oil to fuel its economy. The Asian country surpassed the United States as the world’s largest net importer of petroleum in 2013. China is expected to buy roughly 70 percent of its oil from foreign sources in the coming decades, and Chinese leaders want these countries to be stable governments that aren’t serious rivals in Asia. Currently, China’s largest oil supplier is the Russian Federation — a major geopolitical rival which seriously planned a nuclear strike against the China in 1969.
China’s island-building and aggressive military actions in the South China Sea stem from its desire to control the global energy trade. China recognizes America’s increased production of oil and natural gas derived from hydraulic fracturing, or fracking, as a threat since the United States may soon be able to control the global supply of energy.
The Chinese government is remarkably open about this, even claiming, “reduced dependence on foreign oil will make the US more hawkish in advancing its agenda,” the state-run newspaper China Daily wrote in 2014.
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