China offered oil for sanctions deal over Iran

China is being privately reassured that its supplies of oil would be guaranteed in the event that it supports tough new UN sanctions on Iran, its third largest supplier of crude.

Western sources at the nuclear security summit Washington confirmed "talks have been going in that direction" with China. Such an agreement, designed to clear a major obstacle to consensus on new measures against Iran, may also have been discussed by President Barack Obama with Hu Jintao, the President of China, at bilateral talks this week at the White House.

Iran supplies an estimated 11 per cent of China's energy needs. Among oil suppliers to the Chinese it is only surpassed by Saudi Arabia followed by Angola. Were Iran to lash out and turn off the tap, the consequences for resources-starved China could be severe. Diplomatic signals over what China intends to do about the sanctions issue remain muddled.

At a press conference last night, Mr Obama said: "The Chinese are obviously concerned about what ramifications this [sanctions] might have on the economy generally. Iran is an oil-producing state. I think a lot of countries around the world have trade relationships with Iran and we're mindful of that."

On Monday, White House officials said the talks between Mr Obama and Mr Hu had gone well and China was on board to negotiate the new sanctions which the US want to see in place within a few weeks. But Chinese officials then seemed to pour cold water on the claim yesterday. The Chinese spokesman Ma Zhaoxu made no mention of sanctions on Iran in his statement after the Hu-Obama encounter and in Beijing foreign ministry officials again stressed finding a diplomatic solution to the stand-off with Iran over its uranium-enrichment activities.

David Miliband, the Foreign Secretary, sought to play down reports of continuing Chinese resistance. "I don't believe that China wants to find itself isolated in the international community when it comes to Iran," he told reporters. He said China was on board with a twin-track approach of trying to engage Iran diplomatically while moving towards applying punitive pressure.

It was not clear last night how far along the Americans and the Chinese had gone in trying to detail an oil-supply guarantee arrangement. However, The New York Times reported that the White House had quietly dispatched a senior envoy to the Gulf States as long ago as last December to discuss what might be offered to China to reassure it. That, other sources said yesterday, could extend to offering China limited drilling rights in the Gulf region.

Separately, the Iranian President Mahmoud Ahmadinejad said yesterday that the Islamic state would respond positively if the US changed its policy towards Tehran. Mr Ahmadinejad said he was "drafting a letter to U.S. President Barack Obama", reported Reuters. "We are ready to talk to and to cooperate with [the US], if our rights are respected," he told state television.