From The Media Line.

Iran and China have signed an agreement to allow China to set-up an oilrig in the Gulf despite increasing international calls to enforce tougher sanctions against Iran.

In a deal worth $143 million between the Iranian North Drilling Company and China Petroleum Technology Development Corporation, the latter will be allowed to drill for oil in the Gulf, according to the official Iranian news agency Press TV.

Reuters report.

Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan.

[...]

China has the world's biggest pile of foreign currency reserves, much of it held in U.S. treasury debt. China held $798.9 billion in U.S. Treasuries at end-October.

But any attempt to use that stake against Washington would probably maul the value of China's own dollar-denominated assets.

Telegraph report.

Evidence is mounting that Chinese sales of US Treasury bonds over recent months are intended as a warning shot to Washington over escalating political disputes rather than being part of a routine portfolio shift as thought at first.

A front-page story in the state's China Information News said the record $34bn sale of US bonds in December was a "commendable" move. The article was republished by the National Bureau of Statistics, giving it a stronger imprimatur.

From Foreign Policy.

For every dollar of U.S. investment, China spends 51 cents in Iran.

Reuters report.

Acknowledging China's reluctance, Jim Jones, Obama's national security adviser, told the "Fox News Sunday" program: "We need to work on China a little more. On this issue they cannot be nonsupportive."

Laura Rozen in Politico.

After arriving in Doha today and meeting with the Turkish foreign minister and Qatari leaders, Secretary of State Hillary Clinton heads to Saudi Arabia where she will meet with Saudi King Abdullah and Foreign Minister Prince Saud al-Faisal.

What's on Clinton's Saudi agenda? Prodding Saudi leaders to offer the Chinese energy supply guarantees in exchange for Beijing's nod for Iran sanctions, AFP's Lachlan Carmichael posits.

The Leveretts comment.

Amidst the bravado surrounding President Ahmadinejad's announcement that Iran will start enriching uranium to 20 per cent purity, the Financial Times reported yesterday that China has passed the European Union as Iran's largest trading partner.

...

The finding is indicative of a broader trend: China's growing willingness to work with the Islamic Republic, despite objections from the United States and Europe.

Guardian report.

The sudden deterioration in US-Chinese relations is set to accelerate after the White House confirmed today that Barack Obama will meet the Dalai Lama in Washington later this month in defiance of Beijing.

...

Obama told US legislators on Wednesday that he will take a tougher line towards China over its huge US trade surplus.

Other grievances include US plans to sell arms to Taiwan, the row with the leading search engine Google over alleged cyber attacks, and US disappointment at China's failure to support it over climate change at Copenhagen and on sanctions against Iran.

Guardian story.

China and the US are set for renewed confrontation after Beijing warned of serious repercussions following Washington's announcement of a $6.4bn (£4bn) arms deal with Taiwan.