Asia giants join Iran diplomacy as sanctions hurt trade

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The International Energy Agency, which monitors oil markets for developed countries, said on Friday EU oil sanctions and U.S. financial measures due to take effect over the course of the next several months were already hitting global trade flows.

In an analysis ominous for Tehran, the IEA also said there was enough oil supply worldwide to prevent a price shock if Iran is blockaded this year.

That makes it easier for Washington to impose harsh sanctions envisioned under a new law which requires President Barack Obama to assess the impact on energy markets before pressing ahead with its most draconian measures.

"The market in 2012 likely has sufficient supply-side flexibility" to adjust to any loss in Iranian volumes due to sanctions, its monthly report said. It cited softer demand growth, Saudi spare capacity and the resumption of supplies from Libya that were disrupted last year.

China's Foreign Ministry said on Friday Assistant Foreign Minister Ma Zhaoxu would head to Iran for talks on Sunday.

"We have consistently advocated dialogue as the only proper channel for resolving the Iran nuclear issue," ministry spokesman Liu Weimin told a regular news briefing. Ma will "have a further exchange of views with Iran over its nuclear programme," he added.

China is one of six powers - along with Britain, France, Germany, Russia and the United States - negotiating with Iran over its nuclear programme, which Western states say is aimed at building a weapon but Iran says is peaceful.

Those talks collapsed a year ago and show little sign of resuming. Iran refuses to negotiate over its uranium enrichment programme and Western countries say there is no point in talking unless uranium enrichment is on the table.

China is also Iran's biggest trade partner, buying a fifth of Iran's oil exports last year.