Iran, China Eye Military Cooperation After Oil Deals

Bloomberg:

Aug. 18 (Bloomberg) -- Iran received a military delegation from China, paving the way for cooperation in the defense field, Iran's Mehr News agency reported, citing Brigadier General Nasser Mohammadi Far, the commander of the Iranian army's ground forces.

The Chinese delegation is in Iran for talks on "developing military relations, deepening bilateral ties and paving the way for military cooperation,'' the state-run Iranian news agency said. The press office of China's Ministry of Defense in Beijing declined to comment on the delegation's visit.

"Our mutual enemies possess advanced military technology, and undoubtedly they would rely on this technology in any possible future wars,'' Mehr News quoted Mohammadi Far as saying. "Therefore, it seems necessary that both Iran and China upgrade their defense and military technology.''

China is Iran's third-largest export market for crude oil, and ties between the two countries have strengthened in recent years as Iran started granting stakes in the development of its oil and gas fields. Iran, under U.S. economic sanctions and at odds with both the U.S. and the Europe Union over its nuclear program, is increasingly turning to the East for new markets, opening its economy in return.

Energy Contracts

Iran, holder of the world's second-largest oil and gas reserves, has given Chinese state oil company Sinopec a 50 percent stake for the development of the Yadavaran oil field, one of the Iran's largest undeveloped field.

In March, China agreed to buy more than 110 million metric tons of Iranian liquefied natural gas over 25 years in a contract which may be worth more than $20 billion. The two countries said a month earlier they may set up a tanker venture to carry liquefied natural gas to help Iran ensure deliveries of its gas to the world's second-largest energy consumer.

China is also involved in the construction of the Iranian capital's metro and plans to invest $220 million to help finance a new highway linking Tehran with its Caspian Sea coast.

Chinese President Hu Jintao was among the first to congratulate Iran's new president Mahmoud Ahmadinejad on his election victory in June, and said Chinese leaders looked forward to working with him, Foreign Ministry spokesman Liu Jianchao reported at the time.

The Asia country also took a softer stance than the U.S. and EU on Iran's nuclear ambitions. ``We support resolution of this issue through dialog,'' Liu said on June 28.

UN Resolution

Iran last week rejected a resolution from the United Nations nuclear watchdog agency urging it to freeze a uranium processing program, and vowed to become a nuclear fuel exporter within the next decade. Iranian officials on Aug. 10 removed UN seals on equipment used in uranium enrichment at a facility in Isfahan, the site of Iran's largest nuclear research center.

In response to the Iranian decision, U.S. President George W. Bush told Israeli television he wouldn't rule out a military response against Iran, saying "all options are on the table.''

The EU has been negotiating with Iran to limit the program, and Iran implemented a voluntary freeze on its uranium processing in November.

The U.S., in contrast, severed ties with Iran in 1979 after radical students stormed the U.S. embassy in Tehran, holding 52 people hostage for 444 days. The U.S. accuses Iran of sponsoring terrorism and has imposed unilateral economic sanctions on the country of 70 million, forbidding U.S. companies to invest or sell goods such as drilling equipment, computers or aircraft.

To contact the reporter on this story: Marc Wolfensberger in Tehran at mwolfens@bloomberg.net

Last Updated: August 18, 2005 04:57 EDT