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Cablegate: China/Iran: Sinopec Says Oil Deal Does Not Harm U.S.

VZCZCXRO9308
OO RUEHBC RUEHCN RUEHDE RUEHDIR RUEHGH RUEHKUK RUEHVC
DE RUEHBJ #7445 3452327
ZNR UUUUU ZZH
O 112327Z DEC 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3957
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCNIRA/IRAN COLLECTIVE
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS BEIJING 007445

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/CM, NEA, EEB, AND INR
STATE PLEASE PASS USTR
TREASURY FOR OASIA/DOHNER
USDOC FOR 4420

E.O. 12958: N/A
TAGS: ENRG PREL ECON EINV CH IR

SUBJECT: CHINA/IRAN: SINOPEC SAYS OIL DEAL DOES NOT HARM U.S.
INTERESTS

REF: BEIJING 7434

SUMMARY
-------

1. (SBU) On December 11, Sinopec's Director General for
International Affairs confirmed and elaborated on several elements
of its deal with Iran to develop oil production at Yadavaran. He
told us the activities to be undertaken in Iran constitute a
services contract, not an investment. He argued that the deal would
not affect Sinopec's or the Chinese Government's views of Iran's
uranium enrichment activities. END SUMMARY

WHAT SINOPEC TOLD US
--------------------

2. (SBU) Sinopec International Affairs Director General Tang Suxin
elaborated on the Yadavaran oil deal in a December 11 meeting with
the Embassy. He made the following points:

o The entity that signed with Iran is Sinopec International
Petroleum and Exploration Development Company, Ltd., SIPC. (Note:
SIPC is a wholly-owned subsidiary of parent company Sinopec Group.
Sinopec's listed subsidiary, which trades in the U.S. and on other
international exchanges, is a separate entity from SIPC but is also
under the parent Sinopec Group.)

o The deal is a services contract, not an investment. It is based
on a "capital advance" model, i.e., it is structured as a buyback
arrangement. This is what Iran requires of foreign petroleum
companies. Unlike other countries, there are no product sharing
arrangements attainable in Iran.

o Services contracts like the one Sinopec has signed with Iran will
increase overall global energy supplies.

o The contract value is confidential; media reports of $2 billion
value may have been sourced from the Iranian side.

o Tang could not confirm media reports that the deal also includes
LNG purchases. His initial understanding is that it only involves
petroleum. Tang cautioned that since the SIPC representative is not
yet back from Iran, he may not know all of the terms and conditions
of what was signed.

o China, like other countries, has normal diplomatic and trade
relations with Iran, including with Iran's petroleum sector. These
relations are conducted according to normal practice. They are
transparent and not in violation of any international rules,
regulations, or norms.

o The deal does not hurt other countries or the international
community.

o The deal does not change China's position with regard to
containing Iran's nuclear programs.

o Sinopec is a fully responsible corporation that always has and
will continue to abide by international laws and UN resolutions.

3. (SBU) The DG asked that the points he made be forwarded to the
USG, expressed hope that that the USG will not be "too concerned,"
and that "we will see no negative impact." He then stated again
that the deal will not change Sinopec's or the Chinese Government's
views on uranium enrichment.

RANDT

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