Bloomberg News

Some Chinese Missile Sales to Iran May Escape U.S. Sanctions Law

November 01, 2011

Oct. 27 (Bloomberg) -- U.S. sanctions don’t clearly prohibit China from selling to Iran short-range cruise missiles that might threaten Persian Gulf oil supplies, a congressionally created commission concludes in a draft report.

China, Iran’s largest arms supplier, has sold $312 million in weapons to Iran since 2006, mostly short-range anti-ship cruise missiles, according to the document.

“China’s provision of anti-ship cruise missiles to Iran could allow Iran to target, among other things, oil tankers transiting the Strait of Hormuz” on Iran’s south shore, according to the draft annual report by the U.S.-China Economic and Security Review Commission.

An extended closure of the strait would remove about a quarter of the world’s oil from the market, it says.

The commission recommends that Congress consider clarifying and expanding sanctions to ensure that shorter-range missile sales are a violation of U.S. law.

The sales don’t violate the Iran, North Korea and Syria Nonproliferation Act of 2006, which seeks to prevent the transfer of longer-range missiles, the report said.

Other U.S. sanctions laws, such as the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010, prohibit sales of “advanced conventional weapons” -- an “ambiguous” term that may or may not include short-range cruise missiles, the commision’s report said.

Closing the Strait

The primary missiles in Iran’s mobile arsenal are the C801 and C802, first imported from China in 1995, according to a 2009 report on Iran’s naval forces by the U.S. Office of Naval Intelligence.

Using those missiles, the report said, “Iran can target any point within the Strait of Hormuz and much of the Persian Gulf and Gulf of Oman.”

The Lebanese-based Hezbollah movement, which the U.S. considers a terrorist group, used a C802 missile to strike an Israeli navy ship in 2006.

“Iran could use the missile in the same way,” the report said.

Since Russia began curbing its arms sales to Iran in 2008, China has become Iran’s largest arms supplier, the U.S.-China commission said.

The commission also singled out China as “one of the few countries still willing to sell Iran refined petroleum products,” citing a Congressional Research Service report that China was providing about half of Iran’s gasoline imports as of 2010.

China ‘Opportunity’

“While the fear of U.S. sanctions has caused many businesses to limit or cease operations in Iran, Chinese firms have seen these sanctions as an opportunity for expansion,” the commission’s draft report says.

It said the U.S. government has failed to sanction any Chinese state-owned oil companies for selling gasoline to Iran, and called on Congress to investigate whether sanctions should be imposed.

While nearly 40 Chinese entities were sanctioned 74 times between 2002 and 2009, none were major Chinese oil companies, according to testimony provided to the commission by John Garver, professor of international relations at the Georgia Institute of Technology in Atlanta.

When asked about those figures at a commission hearing in April, Daniel Kritenbrink, then acting deputy assistant secretary of state for East Asian and Pacific affairs, said, “If we find instances of where Chinese firms have violated those obligations, I can assure you we’re going to look at that very carefully and engage with the Chinese very seriously.”

Five state-owned Chinese companies shipped gasoline to Iran in 2010, the commission said. ChinaOil, a subsidiary of China National Petroleum Corp., shipped 600,000 barrels of gasoline to Iran that are valued at $55 million, the report said.

--Editors: Steven Komarow, Terry Atlas

To contact the reporter on this story: David Lerman in Washington at dlerman1@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net -0- Oct/27/2011 15:03 GMT


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