China's Iraq, Iran Options & The SCO.

The Iraq invasion, which unsettled world energy politics in unpredictable ways, set in motion portentous activities in China, a future economic rival to the US. China's leaders, in search of energy sources for their burgeoning economy long before the US invasion of Iraq, had already in 1997 negotiated a $1.3 bn contract with Saddam's Baathist regime to develop al-Ahdab oilfield in central Iraq. By 2001, they were negotiating for rights to develop the much larger Halfaya field. Between them, the two might have accounted for almost 400,000 b/d, or 13% of China's oil consumption in 2003.

However, like the Saddam regime's other oil partners - including companies from Russia, Germany, and France - China was prevented from activating these deals by the UN sanctions then in place. China and other potential oil partners had a great stake in the renewed UN inspections which were interrupted by the US invasion. A finding of no WMDs might have allowed for sanctions to be lifted and the lucrative oil deals activated.

When "regime change" in Iraq left the Bush administration in charge in Baghdad, its Coalition Provisional Authority (CPA) declared all pre-existing contracts and promises null and void, wiping out the Chinese stake in the country's oilfields. As Peter S. Goodman reported in the Washington Post, this prompted "Beijing to intensify its search for new sources" of oil and natural gas elsewhere. That burst of activity led, in the next two years, to new import agreements with 15 countries.

One of the most important of these was a set of deals worth more than $100 bn to develop fields in Iran as well as import Iranian oil and LNG, negotiated only after it became clear that a US military threat to the Shiite theocracy of Tehran was no longer imminent. This set of accords - Iran's largest - severely undermined, according to Goodman, efforts by the US and EU to "isolate Tehran and force it to give up plans for nuclear weapons". On this point, Goodman quoted an adviser to the Chinese government as saying: "Whether Iran would have nuclear weapons or not is not our business. America cares, but Iran is not our neighbor. Anyone who helps China with energy is a friend".

Tehran was in November 2004, when Chinese Foreign Minister Li Zhaoxing told Iranian President Mohammad Khatami that "Beijing would indeed consider vetoing any American effort to sanction Iran at the Security Council". The long-term energy relationship between China and Iran, sparked in part by the American occupation of neighbouring Iraq, would soon be complemented by a host of other economic ties, including an $836m contract for China to build the first phase of the Tehran subway system, an expanding Chinese auto manufacturing presence in Iran, and negotiations around a host of other transportation and energy projects.

In 2004, China sought to deepen political ties between the two countries by linking Iran to the Shanghai Co-operative Organisation (SCO), an alliance of China, Russia, Uzbekistan, Tajikistan, Kazakhstan and Kyrgyzstan. China and Russia soon began shipping to Iran advanced missile systems, a decision which generated angry US protests.

It was then said the systems shipped were a direct threat to US military operations in the Middle East. Iran now could target US troop positions throughout the Middle East, strike US Navy ships, and use its weapons to blockade the Straits of Hormuz through which one-third of the world's traded oil is shipped.

With the help of Beijing and Moscow, Tehran is becoming an increasingly unappealing military target for the US. At the June 2005 meeting of the SCO, after Iran as a guest was invited into full membership, the group called for the withdrawal of US troops from member-states, particularly from the large base in Uzbekistan which was a key staging area for American troops in the Afghanistan War.

The SCO became the first international body to call for a rollback of US bases anywhere in the world. A month later Uzbekistan made the demand on its own behalf. The Associated Press noted: "The alliance's move appeared to be an attempt to push the United States out of a region that Moscow regards as historically part of its sphere of influence and in which China seeks a dominant role because of its extensive energy resources".

Not long thereafter, Iranian President Mohammad Khatami ended his first summit conference with Chinese President Hu Jintao with a joint statement opposing "interference in the internal affairs of other countries by any country under the pretext of human rights". That was taken to be a criticism of Washington.