Kerry Resists as Lawmakers Urge Pressuring China on Iran

Secretary of State John Kerry sought to discourage lawmakers from pressuring China for further cuts in oil imports from Iran as a condition for renewing its waiver from U.S. economic sanctions on the Islamic Republic.

A U.S. law enacted Dec. 31 requires China and other countries to show they’ve “significantly reduced” purchases of Iranian crude or their banks and other entities that finance oil trade with Iran may be cut off from the U.S. financial system.

The U.S. is pushing China to cooperate with sanctions designed to persuade Iran to abandon its suspected pursuit of nuclear weapons. That initiative conflicts with a separate effort to gain Chinese help in defusing tensions with North Korea, whose closest ally and largest trading partner is China.

“There’s only one way to break this cycle” of North Korean belligerence and negotiation, “and that is to partner with China in an approach that’s completely different to anything thus far,” Kerry yesterday told the House Appropriations subcommittee that oversees the State Department budget.

The Obama administration considers China crucial to ending the Korean crisis, and Kerry stressed a unified U.S.-China stance during an April 14 visit to Beijing. North Korea, which is suspected of cooperating with Iran on nuclear and ballistic- missile technology, said yesterday that talks would be possible when it has amassed enough nuclear weapons to deter an attack.

Referring to North Korea’s young leader, Kerry told the House Foreign Affairs Committee earlier yesterday that “absent China coming to the table, I think Kim Jong-Un calculates, literally calculates, ‘I can get away with anything as long as China doesn’t come to the table.’”

Wider Impact

On Iran, Kerry said that any push to have countries such as China to further reduce their imports of Iranian oil would affect Americans, as well.

“There’s a point where these reductions become not only very difficult for a particular country to go beyond a certain point, but also where they have an impact on the global price,” Kerry told the House Foreign Affairs Committee.

“If you want the price to go up here, you can have the Chinese vying for more somewhere else because they can’t get it where they’re getting it now,” he warned.

Kerry said that “things are interconnected,” and that if countries were pushed to make further import cuts, demand would push prices up, and “you’re going to see some price changes that may have everybody screaming as the summer comes.”

Some energy specialists dispute that assessment. Citigroup Inc. (C)’s global head of commodity research, Ed Morse, said supply is not currently a problem. “It’s my judgment that there’s plenty of oil around,” Morse said in a telephone interview.

Saudi Commitment

“The Saudis have made a commitment that if anybody wants incremental supply they’ll provide it, and they’re a supplier to China,” Morse said. “Oil has just fallen from a prevailing price of $110 to $100 a barrel, and that’s another sign that physical markets are extremely well-supplied,” he said.

Representative Ted Deutch, a Florida Democrat, told Kerry that China’s imports from have risen from 354,000 barrels a day in February to 415,000 barrels a day in April. Before waiving sanctions again, “there should be much more done and expected of the Chinese in terms of real reductions,” Deutsch said.

Energy data compiled by Bloomberg, indicate that China’s crude oil imports from Iran rose from 309,218 barrels a day in January to 520,181 barrels a day in February. In December 2012, China bought 591,883 barrels a day of Iranian crude.

Kerry told Deutch that he would show him statistics that would demonstrate the import reductions countries such as China have already made.

“There has been a net reduction,” Kerry said.

To contact the reporter on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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