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