Newsletter No. 1431
News-Analysis
August 4, 2009

 

CHINA BELATEDLY SWOOPS DOWN ON AZADEGAN

Before the Abe administration pulled the plug on Inpex’s massive deal with the Iranian government over the Azadegan oil field in September 2006, Iranian negotiators were in the habit of furiously waving the China Card. They suggested that if Japan pulled out of the Azadegan deal, then they would turn to Beijing instead. This was meant to stiffen the backs of Japanese conservatives in the face of pressure from Washington. It worked for a while, but eventually Tokyo caved to the Bush administration in line with Abe’s own rightwing ideology.

However, after Tehran slashed the Inpex share from 75% to 10% and took over operations, they seemed to be unable to consummate their threat. Chinese oil companies did not sweep in. Other international oil companies also kept their distance. The project fell to domestic Iranian companies that were not really capable of fully developing the massive Azadegan field.

New reports to hand suggest that the China Card has been played at last. It is said that the Chinese National Petroleum Company (CNPC) signed a memorandum of understanding with the National Iranian Oil Company (NIOC) to fund the bulk of the development at the South Azadegan oil field. Back in January, CNPC also signed a US$2 billion agreement with Iran in January to develop the North Azadegan oil field to produce 75,000 bpd over the next four years. The new deal for South Azadegan is thought to be worth around US$2.5 billion and calls for CNPC to acquire 70% of the NIOC shares in the project, which is eventually intended to produce 260,000 bpd.

The South Azadegan field holds estimated reserves of around 33.2 billion barrels of oil and is one of the world’s largest finds in the last few decades.

On the other hand, a different report suggests that the CNPC-NIOC South Azadegan MoU was actually signed secretly some months ago, but that negotiations since that time have not gone so well.

China’s Advances

At any rate, the China-Iran oil and gas partnership is clearly moving into a much higher gear this year. Aside from the North Azadegan and South Azadegan fields, CNPC recently replaced Total, the French energy company, as the main foreign participant in the development of Phase 11 of the giant South Pars gas field. This is all on top of the December 2007 US$2 billion deal gained by China’s Sinopec to develop Iran’s Yadavaran oil field.

Basically, the situation is that Tehran would prefer to deal with European and Japanese oil companies which they see as having better technology, but these have consistently failed to meet their contractual obligations under the political pressure that Washington has placed its allies. This has forced Tehran to turn to China and—to a lesser extent—Russia as international partners that do not buckle to American pressures quite so readily. Further, the leaders of the Islamic Republic tend to trust the Chinese far more than the Russians for geo-historical reasons and because Beijing has been reasonably tenacious in maintaining its Iranian links against US pressure over the past three decades. The only major “failing” of the partnership came in 1997 when Beijing capitulated to Washington and terminated their nuclear development cooperation with Iran.

These are the main political factors that explain the major advances made by China this year in gaining new oil and gas contracts in Iran.

Japan’s Reactions

The Japanese media has so far had little to say about the reports of the new CNPC-NIOC South Azadegan deal. They seem to be studiously ignoring what should be a national embarrassment. A British source suggests that Japanese officials are grumbling that China’s oil deals are detrimental to efforts to force Tehran to give up its nuclear development ambitions. METI Vice-Minister Harufumi Mochizuki told reporters, “I think we have got a premise that the international community must cooperate to handle that problem.” (There used to be a time when METI officials were actually more concerned about Japan’s own energy security than the latest crusade out of Washington, but this is the new age.)

Today, at a press conference, a MOFA spokesman was asked about Azadegan, but he basically refused to comment.

One interesting point, however, is that both METI and MOFA officials now seem to be openly acknowledging that they withdrew from the Azadegan project out of “concern about the Iranian nuclear issue.” Back in September 2006, when the deal was actually cancelled, they used to deny this idea strongly and declared that the agreement collapsed due to the Japanese belief that the oil development was not commercially viable. Go back to the Shingetsu Newsletter archives of that time to see how the “party line” out of Tokyo has evolved.

NO SUPPORT FOR THE OPPOSITION

There is further confirmation that MOFA is basically taking the side of Ayatollah Khamenei and Mahmud Ahmadinejad against the political opposition that believes that the recent presidential elections were rigged. Two former presidents, Hashemi Rafsanjani and Mohammad Khatami, refused to show up for the ceremony to swear in Ahmadinejad as president. They took this action in symbolic protest to the regime’s handling of the contested elections and their aftermath. Also, hundreds of protestors, some of them honking car horns, gathered near a central Tehran square, where riot police and Basij militia once again assembled to prevent any demonstration.

At the same news conference in which the MOFA spokesman was asked about Azadegan, he was also asked whether the Japanese ambassador would attend Ahmadinejad’s ceremony. The spokesman said that there was no problem to attend the ceremony because this is the established government. Had MOFA considered any other possibility than attendance? No, not at all.

The Japanese government has, to date, shown not a shred of support for those who have beaten on the streets or tortured in jail for the crime of calling for fair elections in Iran. Make no mistake—Tokyo’s support for the Washington line on the Iranian nuclear question has nothing to do with humanitarian or democratic concerns.

Why did Tokyo back out of the Azadegan deal? Why does it harp on Iranian nuclear development even in the absence of any evidence of an ongoing military program? Why does it say nothing as the regime beats and sometimes kills it own people in the streets of Tehran? Perceived self-interest. Period.

Has MOFA considered any other possibility, such as the larger human interest? No, not at all.

HYPE ABOUT A STUDENT

At the end of July, the Yomiuri Shinbun raised the red flag over an Iranian university student who studied about nuclear technology at Tohoku University. The institute from which the student had come, the Jaber Ibn Hayan Research Laboratories, was designated by METI in March 2004 as an institution that may divert exported goods and technology for the development of nuclear arms (although, of course, there is no evidence for this claim).

At that time, the student had already been at Tohoku University for more than a year, and he continued his studies unmolested. The student studied technologies to recollect metals, such as silver and palladium, from nuclear waste solution generated when spent nuclear fuel is reprocessed. The study was not directly connected to the extraction of plutonium, but, according to the Yomiuri, it “could have made a significant contribution to developing a reprocessing system aimed at producing nuclear bombs.”

Was this the intention of the student’s research? Unclear. Would the knowledge he gained at Tohoku University really have made any major contribution toward nuclear weapons development in Iran? Unclear. Does the Iranian government even have a nuclear weapons program at all? Unclear.

Still, the Yomiuri was miffed, and they wanted to send someone to jail over this matter: They ruefully noted, “Due to a flaw in the current related law, the Sendai-based university is unlikely to face charges.”

Oh well! At least it made a good scare headline on a slow news day!

ADDENDUM
August 5, 2009

PRIME MINISTER TARO ASO CONGRATULATES AHMADINEJAD

Prime Minister Taro Aso and Foreign Minister Hirofumi Nakasone have both forwarded official congratulations to Mahmoud Ahmadinejad on his election “victory” and the beginning of his second term as president. In his congratulatory letter, Aso expressed the hope that Tehran could play a significant role in the establishment of international peace and security.

Meanwhile, the political leaders of the United States, Britain, France, and Germany publicly indicated that they will NOT congratulate Ahmadinejad on his second term in light of their doubts about the legitimacy of the elections and the Iranian government’s handling of the protests that followed.

This all underlines the fact that Tokyo has taken a rather different approach to this issue than its Western allies. The Aso administration’s tilt in favor of the hard-line government of Iran is all the more perceptible.