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Are the Chinese Helping Obama or Iran?

Yesterday’s executive order signed by President Obama enforcing a total ban on transactions with any entity doing business with Iran’s Central Bank is the lever by which an international oil embargo of the Islamic state can be put in place. In order to prepare for this eventuality, American diplomats have in recent weeks been urging Saudi Arabia to step up oil production in order to meet the shortfall that will exist once Iran’s exports are shut down. But as this report from Reuters shows, its not entirely clear whether the uptick in Saudi oil supply will be used by China to supplant Iran’s petroleum or if it is just looking for leverage in order to get a better deal in future contracts with Tehran.

According to Reuters, China has been taking seriously the possibility of a cutoff in Iranian oil and has been looking to pick up any supplies it can get elsewhere. That’s the good news. But the bad news is that oil traders in China believe that Unipec, an entity that represents the country’s top refiner in such deals, is buying up Saudi oil specifically in order to bolster its position in future deals with Iran. That means the American belief that it can orchestrate the financial isolation of the Iranians may be a trifle optimistic.

As Reuters reports:

Iran is keen to secure customers as new EU sanctions banning its oil, designed to discourage the country’s nuclear program, add to U.S. measures.

Officials from the two countries were expected to hold talks as early as this week in Beijing.

“Unipec is gambling now,” said a Beijing-based oil trader. “If the Iranian side can compromise and reach a term deal, Unipec will get a large volume of crude at favorable prices, offsetting the premiums it paid to buy alternative oil over the past months.”

If that’s the way things work out, then all the huffing and puffing about international sanctions on Iran may turn out to be so much Western bluster that won’t persuade Tehran to give up its nuclear ambitions.

The wild cards in any sanctions plan have always been Russia and China, two nations eager to do business with Iran and also always interested in thwarting American foreign policy goals. Both pay lip service to the need to stop Iran from going nuclear because that scares them as much as the United States. But both nations have sought to play both ends against the middle when it comes to Iranian sanctions.

Just as worrisome is the belief conveyed in the Reuters report there simply is not enough alternative oil available for shipment to satisfy Iran’s current customer list, especially China.

This revelation ought to place the administration’s push for sanctions in perspective. As I wrote yesterday, President Obama hoped to buy more time for diplomacy with his acquiescence to congressional legislation on the Iran Central Bank. But if even that draconian measure is doomed to failure, it is hard to see what arguments the U.S. can put forward to avoid the conclusion the only way to stop Iran is by force. That is particularly true, because even if the sanctions did work, the Israelis have good reason to worry they will only be used as a pretext for U.S. negotiations with Tehran that will allow the ayatollahs to run out the diplomatic clock while they get close to nuclear capability.

This means that just a day after Obama reaped a great deal of justified praise for signing on to the bank ban, the president may find he has actually done very little to stave off the need for a direct confrontation with Iran.