China and India Slap Down Deal for Cooperating on Iran in Exchange for Oil

US vice president Richard Cheney arrived in Riyadh, Tuesday, Jan. 17, with a proposition for King Abdullah bin Abdulaziz to put before Chinese and Indian leaders in his coming Asian tour. The plan was to break through the impasse over the referral of the Iranian nuclear program to the UN Security Council by persuading Beijing and New Delhi to drop their objections.


And who better to swing the deal than the world’s top energy supplier to the two booming economies?


Abdullah received his American guest with full honors.


When last he visited America, President George W. Bush received him at his private ranch in Crawford, Texas. The Saudi monarch reciprocated by inviting Cheney to his farm outside Riyadh. The two estates are strikingly different. Where the presidential ranch is made up of solid structures, the royal farmer prefers opulent tents in the desert, and instead of horses and tractors, he breeds prize camels.


DEBKA-Net-Weekly’s Washington and Gulf sources report that, when they started talking, the Saudi ruler and his American guest were just as far apart on the tactics for dealing with the Iranian nuclear threat – and on other matters too.


In general, Washington was aware that the royal trip to China and India was designed as the opening shot of Riyadh’s new global posture that made a point of distancing itself from Washington. Saudi Arabia, like the rest of the Persian Gulf region, is bracing itself for the departure of US forces from Iraq and the dilution of the American military presence in the countries neighboring Iraq. Saudi rulers have therefore set out to develop an alternative shield against radical Iran and had determined to start looking in Asia.


Their rationale was simple: the volume of Saudi and the oil emirates’ oil exports to Japan, China and India surpasses its sales to the United States and Europe. Beijing in fact relies on Saudi Arabia for one-third of its energy consumption. China and India are competing in the effort to build big war fleets for long-range duty to secure their oil supply routes. These naval patrols will focus on the Persian Gulf and Arabian Sea and might therefore act as back-up for when American military and naval strength is whittled down.


 


Even Saudi Arabia needs cheap capital


 


This does not mean, as DEBKA-Net-Weekly‘s Saudi experts stress, that Riyadh is in a hurry to forego its strategic partnership with Washington or give up its American defensive umbrella. For the moment, the new Saudi Asian orientation is heavily focused on attaining a bigger share of the energy markets of China and India. Long-term contracts determining quantities have been negotiated and drafted. The fine print still remains to be filled in. Abdullah’s first thought before Cheney arrived was to exploit the final negotiating stage of these contacts to insert a feeler on the availability of security services from Saudi Arabia’s two big Asian customers. He was also intent on boosting oil sales to raise cheap capital for the giant 160 billion-dollar project to open up new oil fields and renovate the industry as a whole, which is to be launched this year.


The Bush administration was not entirely comfortable with the Saudi go-it-alone sally into fresh pastures in Asia. A certain presence in the 250-strong royal retinue made them particularly uneasy. The foreign and oil ministers, Prince Saud al Faisal and Ali Naimi, and intelligence chief Muqrin Abdulaziz, were obvious choices for the trip. But the presence of the Saudi Labor minister Dr. Ghazi bin Adulrahman al Qusaib was a reminder of a fast one Riyadh pulled on Washington thirty years ago.


Up until 1976, the American oil company operating Saudi oil fields hired all the labor employed there, while Riyadh footed the US-scale payroll. But then, Al Qusaibi made a trip to the Far East and returned with cheap labor, putting an end to the American monopoly on the staff employed in the kingdom’s oil industry. Officials in Washington were not happy to be reminded that the Saudis were fully capable of surprising them with such strokes of independence.


Cheney arrived in Riyadh fully briefed on these undercurrents and prepared for a tough argument with the Saudi monarch. There was plenty of urgent business to discuss – terror, Iraq, Syria, the forthcoming Palestinian elections. But, after some necessary updates on the understandings the president and the king reached in Crawford last year on a coordinated energy policy, the two soon got down to the real business of how to handle Iran’s military nuclear program.


Abdullah is fully alive to the peril posed his kingdom, no less than Israel, by an Iranian nuclear bomb. Nonetheless, he insists its must be handled by diplomacy and negotiation alone. He repeated this to his American visitor, arguing that it would be a serious error for Washington to resort to military action against the Islamic republic. The Saudi king was even more vehemently opposed to an Israeli strike.


 


Military action and oil sanctions are anathema


 


For Abdullah, diplomacy translates into mediation through secret contacts.


Any sort of sanctions against Iran involving oil are anathema to the Saudi monarch. He objects in principle to sanctions against any oil-producing state, especially one of the majors, like Iran. Furthermore, he fears the imposition of penalties would raise military tensions in the Gulf region already preyed by the Iraq conflict to an intolerable level. Iran, he believes, is quite capable of retaliation drastic enough to paralyze oil exports for long periods. Abdullah would not put it past Tehran to strike back at Saudi Arabia as punishment for being an important American ally.


Amid subtle haggling, the US vice president sought to persuade the Saudi monarch to join the maneuver for stretching out the diplomatic pressure on Iran by getting its nuclear case referred to the UN Security Council for debate. Abdullah was asked to use his visit to Beijing and New Delhi, the first ever by a Saudi monarch, to bring both powers aboard this plan by an offer of Saudi flexibility on long-term oil contracts in return for their cooperation.


Cheney argued that this ploy took into account the king’s objections to military action and oil sanctions. He pointed out that both China and India continue to sell Iran nuclear technology and moreover side with Iran at the UN nuclear watchdog’s board debates on the issue in Vienna. Their attitude is harmful in that it has given the IAEA director Dr. Mohammed ElBaradi rope for foot-dragging. He is trying to postpone the crisis meeting the European negotiators called for February 2 to early March. Tehran has gained another month’s grace for its plans.


Abdullah was not too enamored of the American plan, especially when his advisers warned him that acting on Washington’s behalf in the two Asian capitals would be counter-productive to the important goal of distancing Riyadh from American policy objectives. But he finally came round to Cheney’s request because he appreciated that the Iranian nuclear threat had become as compelling for Riyadh as its ambition to boost oil sales to Asia.


 


Oil rewards followed by a big stick


 


From Sunday to Tuesday, Jan 22-24, the Saudi king did his best to bring his Chinese and Indian hosts round to cooperating with the effort to refer Iran’s nuclear activities to the Security Council. By Wednesday, Jan. 25, he had to concede failure.


Both Chinese president Hu Jintao and Indian prime minister Dr. Manmohan Singh refused to go along with the plan. They objected strenuously to mixing oil transactions with political issues as fraught as the drive to halt the Iranian nuclear program. Both also refused to allow their relations with Tehran to hinge on their trade ties with Saudi Arabia.


The Saudi king was forced to bow to his hosts’ wishes on this point and turn to the business of winding up the contacts according to the plan set for the trip before the US vice president landed in Riyadh.


When word of this fiasco reached Washington Wednesday, the Bush administration rushed in radical action.


Two undiplomatically stern American warnings were delivered to Beijing and New Delhi. Deputy secretary of state Robert Zoellick said he had warned Chinese officials that allowing Iran to develop nuclear weapons could threaten Beijing’s crucial supplies of Middle East oil.


This was a thinly-veiled hint that UN sanctions and any other drastic action such as a military strike in the oil producing region could cut off the flow of Iranian oil to China. He spoke of “Middle East oil” to imply that not only Iranian supplies were at stake, but that it was in Washington’s power to stall the oil contracts King Abdullah had just signed with President Hu.


This tie-in left the very impression the Saudi king had been so an anxious to avoid.


In New Delhi, US ambassador David Mulford waved a really big stick. A landmark nuclear deal recently concluded between India and the United States would “die” in Washington, he said Wednesday, if New Delhi supports Iran at the upcoming meeting of the UN atomic watchdog agency. “I think Congress will simply stop considering the matter,” the ambassador remarked.


The Saudi king’s failure to win Chinese and Indian cooperation for hauling Iran before the Security Council followed abruptly by blunt American threats spoiled Abdullah’s Asian venture. But it also forced him to realize that, whether or not he wanted to be involved, the Iranian nuclear crisis would dominate Riyadh’s political and economic agenda in the foreseeable future.

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