Germany's Merkel urges China to use influence on Iran

Reuters News
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Posted: Feb 02, 2012 2:44 AM
Germany's Merkel urges China to use influence on Iran

By Lucy Hornby and Andreas Rinke

BEIJING (Reuters) - German Chancellor Angela Merkel on Thursday urged China to use its influence to persuade Iran to give up its nuclear program, at the start of a three-day visit when she will also seek China's support for the ailing euro.

Merkel is expected to make the case for tighter sanctions on Iran, originally proposed by the U.S. and designed to prevent it from developing nuclear weapons. She said she has already had "long discussions" with President Hu Jintao and Premier Wen Jiabao over Iran sanctions.

"If we talk about the European sanctions against Iran, the question is how China can make better use of its influence to make Iran understand that the world must not have another power with nuclear weapons," Merkel told an audience at the Chinese Academy of Social Sciences.

She added that she hopes the U.N. Security Council can pass a unanimous resolution on the matter.

The United States imposed the harshest sanctions so far on Iran when President Barack Obama on December 31 signed into law new sanctions on transactions involving Iran's central bank.

The European Union last week imposed a ban on the import, purchase or transport of Iranian oil.

China has long refused to support sanctions on Iran, although Wen Jiabao said last month that Beijing "adamantly opposes" Iran developing nuclear weapons.

The Islamic republic, China's third-largest source of foreign oil, says its nuclear program is for civilian use.

Merkel could urge Beijing to further cut its crude imports from Iran, a German source said earlier, but that is likely to go unheeded.

Li Xiangang, an expert on China-Middle East relations at the China Institute of International Studies, said China would only act after the International Atomic Energy Agency sends inspectors to Iran.

"China opposes the use of nuclear energy for proliferation but believes it is possible to use it for peaceful purposes," said Li, who served as an official in the Chinese embassy in Iran in the 1990s.

"Energy sanctions against Iran will only cause world oil prices to rise and hurt the global economic recovery. That is why I think China is not supportive of further sanctions on Iran."

A CALL FOR OPEN MARKETS

Merkel also pressed China to improve protection of intellectual property rights, calling on Beijing to ensure that German businesses had reciprocal access to its markets.

That concern will likely be repeated when she travels to Guangzhou on Friday for a business summit. Merkel is accompanied by a number of German CEOs, who during a similar summit two years ago also pressed for more market access.

Germany enjoys strong exports to China, especially in machinery and high-tech products. But Chinese exports have eroded manufacturing in its European neighbors, and Chinese efforts to move up the value chain could also threaten German business in the future.

For China, the visit is a chance to be briefed directly on the European crisis. In her speech Thursday, Merkel emphasized that European countries will need better fiscal discipline , more budgetary integration.

European countries will need to cut red tape and barriers to employment if they are to grow, she said.

Chinese leaders view Merkel -- and Germany -- as the definitive voice on the European crisis, in part because of Germany's economic strength compared with its European neighbors, analysts say.

Market fears over the fate of the euro zone economies have eased somewhat since the European Central Bank extended liquidity to banks in December, but serious fiscal and structural problems continue to undermine investor confidence in Europe, China's biggest export market.

China has said it is interested in buying assets in Europe but is less enticed by European bonds. About a quarter of China's $3.2 trillion in forex reserves are already in euro-denominated assets.

In the past few months, state-owned Three Gorges Corp paid the Portuguese government $3.5 billion for its stake in utility EDP, and China's sovereign wealth fund bought a nearly 9 percent stake in London water supplier Thames Water.

The appetite for deals isn't limited to the Chinese state. Private Chinese firm Sany Heavy Industry agreed to pay about 360 million euros for privately held German concrete pump maker Putzmeister.

(Additional reporting by Sui-Lee Wee; Editing by Don Durfee and Jonathan Thatcher)