With Beijing, pragmatism beats principle

From the perspective of Washington, the China tea leaves are suddenly looking less ominous. In the space of a week, Beijing has agreed to sit down for serious discussions on new Iran sanctions and to attend a global summit on nuclear security in Washington.

It was barely a surprise at the weekend, therefore, when the US Treasury Secretary, Timothy Geithner, let drop that the planned release of a report on China's management of its currency, the yuan – which had been due on 15 April, two day's after President Hu Jintao's visit to the US capital – would be postponed for several months. Some in Congress had expected – even hoped – that the report would name China a "currency manipulator".

A crisis in Sino-American relations was not something Barack Obama's foreign policy team expected. But several things went wrong at once. The US President saw the Dalai Lama, Washington signed a huge arms deal with Taiwan and Google got into a row over its decision to close its Chinese language portal.

Repairing these ragged edges became a top priority for the White House. On Thursday, Mr Obama talked with Mr Hu, pictured, by phone for a full hour.

China, a holder of so much of America's astronomic debt, is a key partner in global diplomatic and economic affairs, even in the worst of times. And right now there is precisely that small question of Iran. China is one of five nations on the UN Security Council with a veto. Without its support, new sanctions cannot happen.

The US, in common with most other countries, wants more than ever to persuade China to revisit its currency policy. The yuan is currently pegged to the dollar at a rate that, by some estimates, devalues it by as much as 40 per cent. This gives a huge advantage to Chinese exporters.

No one at the White House wants to admit that the delaying of the release of the Treasury's currency report on China and the start in New York this week of high-level talks on sanctions on Iran are linked. Perish the thought.

Larry Summers, Mr Obama's top economic advisor, even went on television yesterday to deny that such a thought had entered anyone's head. The line, instead, is that there are lots of international financial meetings on the calendar this year where the China currency issue can be discussed.

So Mr Obama is showing foreign policy pragmatism again (to the disappointment of some on Capitol Hill who are dying to get fierce with China on the currency question).

The question is, will it pay off? It may be good news that China wants to join talks on sanctions on Iran, but expect to see its diplomats pushing hard if not to block sanctions then certainly to water them down.

It is not just that China has long been averse to sanctions of all kinds. It too has reasons for short-term pragmatism. Who supplies more than one tenth of all of China's energy needs? The Iranians.