Does Oil Dependence Thwart Obama’s New Nuclear Posture?
Posted April 6, 2010 at 9:29 am 
Filed in: Today (April 6) at 9 AM EST, the official Chinese government news outlet Xinhua released an article entitled “Iran not to talk with major powers over its nuclear program.” These not-to-be-held talks are with the five permanent members of the UN Security Council plus Germany (G5+1).
Iranian Foreign Ministry Spokesman Ramin Mehmanparast somewhat cryptically announced that “If the G5+1 countries’ agenda is Iran’s nuclear issue, ours is not,” and “We believe our nuclear case has been over and it is now moving in its natural path.” Xinhua did report, however, that Tehran is ready to conduct fuel swaps with Russia, in which low-grade uranium would be reprocessed abroad into higher-purity enriched fuel rods for civilian use.
At 11 AM EST, U.S.-Government funded Voice of America headlined “Iran Ready for Negotiations, Says Spokesman.” Also quoting Ramin Mehmanparast, VoA explained that Iran is in fact ready to talk to the G5+1, but only about the fuel swapping. Despite the upbeat headline, the article noted that last Saturday “Iranian President Mahmoud Ahmadinejad again rejected U.S. efforts to engage Tehran in diplomacy on its nuclear program.”
The timing of Mehmanparast’s announcements can hardly be accidental.
Late last night, President Obama announced the release of the new United States strategy on nuclear weapons deployment, the Nuclear Posture Review. The new strategy is part of Obama’s global nuclear disarmament and nonproliferation effort, and it shifts from a historical position reserving the right to use nuclear weapons in a broad range of circumstances to one in which their “fundamental role” is deterrence. Additionally, the United States will not use nuclear weapons against a non-nuclear state.
President Obama is using the new strategy as a launch pad for a series of arms-control and nuclear security talks around the world over the next couple of weeks. Unfortunately, Iran seems unwilling to get with the program. Asked by the New York Times about the Iran issue, Obama said that “the current course they’re on would provide them with nuclear weapons capabilities.” Yet negotiation continues to be the preferred path.
The difference between Chinese and American perceptions of and hopes for Iran, as summed up in the difference between Xinhua and VoA headlines, is closely related to Iran’s oil situation.
Home to the second largest proven oil reserves (after Saudi Arabia), Iran produces about 4.2 million barrels per day. Yet Iran has a considerable refining deficit, forcing it to import more than 5 million gallons of gasoline every day. It is also in dire need of expertise and funding to invest in its oil fields.
China, which imports around 700,000 barrels per day from Iran, has been eager to help. Along with Malaysian and Indonesian oil companies, it is contributing to new refineries and selling oil rigs to the Iranian National Oil Company. China’s CNPC is also partnering with Tehran on long-term development projects in the massive Yadavaran oil field and South Pars gas field.
In response to suggestions of sanctions on Iran’s oil and gas exports, last week Ramin Mehmanparast told Reuters that they would certainly fail: “Talking about imposing sanctions on Iran’s oil sector is like a joke.” “Such a move would hurt other (importer) countries.”
This is true. Even if the U.S. – or any of its allies – does not import Iranian oil, we depend on it to keep prices stable. If Iranian oil were suddenly taken off the market, the countries that were importing it, such as China, Japan and India, would compete for all the alternative sources. A massive and sustained price spike, and possibly shortages, would result.
Iran is keenly aware of the cards it holds, particularly in the midst of a global recession. As long as the U.S. is dependent on oil imports, our negotiating power around nuclear security is constrained. And as long as Iran is an important source of equity oil and engineering projects for China’s national oil companies, Beijing’s ambivalence towards Iran’s nuclear program is likely to continue.
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