China in Iran: The consequences of a strategic partnership

Not only has China provided a means for Iran to survive under the immense pressure exerted by the US but it has also increased its own strategic clout in the region simultaneously. It is also believed that this partnership will result in further linkages in Pakistan and also possible economic in-roads in Afghanistan. With China thus slowly consolidating its hold on another key actor in Asia, it is imperative to understand that the repercussions and consequences of the same will be plentiful. In this context, can any backlash against such a partnership be effective, and if not, then what will it mean for other important stakeholders in the region?

It is first imperative to understand the nature of this partnership so as to grasp the magnitude of its effects. Detailed in a 18-page proposed document obtained by the New York Times, this new partnership is meant to span the next 25 years. It will allow China to expand its presence in a multitude of sectors across Iran. According to the draft agreement, the projects will include investment in airports, high-speed railways, subways, highways and other such infrastructural projects. There are also proposals for free-trade zones in Maku, in North-western Iran, in Abadan and on the gulf island Qesham. China has thus sought to make multisectoral in-roads in Iran, ranging from infrastructure to trade and from banking to telecommunications. In this regard, the proposed document also includes plans for infrastructure in support of its 5G telecommunications network. While on the one hand this will apparently grant Iranian authorities “greater control over their cyberspace”, it will set the foundations for the establishment of Beidou (China’s Global Positioning System) and other such Chinese technology, in a critical region of the globe. Much of these projects are thus closely aligned with China’s larger aspirations. Offering Iran an apparent lifeline will undoubtedly be beneficial for the struggling country, but it will be nothing in comparison to what China itself will gain.

In exchange for the investments the Chinese government will make in Iran, it will receive a regular supply of oil from Iran. According to a few sources, this supply could also be granted at a discounted rate of more than 30%. The fact that China imports almost 75 percent of its oil from abroad, at nearly 10 million barrels a day, will mean that this deal is highly advantageous for the Asian giant. However, this is only one in a number of other benefits that China will receive. The setup of its 5G network in Iran will signify a new era for companies like Huawei as well, which are currently facing a global backlash. Countries like the United Kingdom, once a firm proponent of 5G, are now withdrawing support for the same. This partnership with Iran will therefore accord China with a means through which it can now establish its presence in another geopolitically critical region. The significance of this is heightened by the fact that this new investment program will also provide for assistance and cooperation in military matters as well.

China’s military cooperation with Iran, through this deal, will apparently cover assistance, training and intelligence sharing among other aspects of defence. However, this would not be the first inroads made by China in this regard. In 2014, the chief of the Iranian navy visited China in order to discuss “anti-piracy cooperation” and “humanitarian assistance” among other issues. A year later, the deputy chief of staff of the Peoples Liberation Army Navy met with Iranian Defence Minister to lay the foundations for deeper military cooperation in the future. This was followed by a military cooperation agreement in 2016 that seemingly began the consolidation of military ties. In addition to these meetings, the two countries have conducted a number of joint military exercises in the Indo Pacific. In 2019, these exercises were expanded to include joint naval drills with Russia as well; a direct challenge to the US during a time when US-Iran relations had reached a crisis point. During the exercises, Chinese media quoted the commander of Iran’s navy as stating that “the era of American invasions in the region is over.” Today, with China set to invest around $400 billion in Iran over the next 25 years, the significance of such dynamics has come to the forefront.

It is therefore to be understood that the new investment program initiated by China is symbolic of a potential mechanism for both countries in confronting US domination in the region. In this regard, it must be acknowledged that China’s attempts at strategic influence has come at a time when it possibly perceives the United States as weak. Initiated at a time when the US is dealing with internal political turmoil, the effects of the pandemic and a possible recession, it must thus be viewed as another one of Beijing’s strategic game plans. The fact that this partnership has been established in such a way that it lasts over a quarter of a century will mean that China will have a significant amount of time to entrench itself in the region. The anti-American edge for the Iranians is evident in that not only did Trump’s withdrawal mean a re-imposition of sanctions and a loss of American investment but also the withdrawal of support from American allies. For years, Iran had turned towards European countries for trade and investments, however, American withdrawal put an end to the same. While many countries in Europe opposed Trump’s policy, they withdrew from Iran nonetheless. This has inevitably culminated in a crisis for Iran, with oil exports plummeting, the Iranian rial being halved in value and living costs across Iran rising exponentially; a situation that has left Iran frustrated and desperate.

The deal with China will therefore provide Iran with an opportunity to subvert US sanctions and revive its economy. One of the most significant benefits Iran will receive on this end will be China’s purchase of Iranian oil at a quickened pace, a dynamic that will provide a massive stimulus to Iran’s ailing energy sector. According to reports, $280 billion out of the $400 billion will go towards Iran’s oil and gas sector only. Iran is one of the world’s top five natural gas producers, however, since sanctions were reintroduced by the US, not only has its economy shrunk by around 9.5% but its oil output and revenues have also plummeted. Iran’s output stands at around 2 million barrels per day today, falling from nearly 4 million in 2018. For a country that has been heavily dependent on its oil sector, these losses are devastating. Reportedly, Iran’s oil industry also requires more than $150 billion for modernization of wells, refineries and other infrastructure, finances that this deal could now provide for the country. Therefore, many within Iran have now expressed support for this new Chinese deal. According to Ayatollah Khamenei’s top economic adviser, Ali Agha Mohammadi, Iran desperately “needs to increase its oil production to at least 8.5 million barrels a day in order to remain a key player in the energy market, and for that, it needs China.” However, the situation may be more critical than this, as Iran has to now deal with the economic devastation left behind by the Covid-19 pandemic along with the lapse in its energy market.

The economic respite offered by China, complemented by a shared sense of anti-Americanism, has thus spurred both countries into this new partnership. However, cooperation between the two has existed before this deal and gone beyond mere economic and infrastructural projects. In 2011 when Iran claimed to have shot down one of the U.S. Air Force’s RQ-170 stealth drones, there was speculation that it would end up in the hands of the Chinese. While Sino-Iran relations were not at the stage they are at today, there still existed a robust arms sales relationship between the two and the transfer was a definitive possibility. Similarly, at the peak of tensions in 2019 with the US, Iran downed another drone, and reports once again show that China was given a part of the drone by Iran to conduct research. In the context of the rapid development of relations, it is more likely than not that this did indeed occur. The significance of these transfers lies in the fact that access to the drone would allow China to reverse engineer critical technologies within the drone and incorporate them within their own systems, a possibility that could threaten US capabilities. Covertly undermining the United States and facilitating Chinese incursions into the region has thus allowed Iran to boost cooperation with China and is also perhaps a precursor to this new security deal.

With that being said, greater cooperation between Beijing and Tehran will thus be a significant threat to US interests in the region. With the deal practically emerging out of anti-US sentiments shared by both powers, it is to be understood that much of the collaboration and cooperation hereon will also be in confrontation of the US. It can therefore only be expected that the United States will soon retaliate. Mike Pompeo has already not only claimed that the partnership would “destabilize” the Middle East but also threatened sanctions against China if this deal goes through. In this regard, a State Department spokeswoman also wrote in response to the draft that “The United States will continue to impose costs on Chinese companies that aid Iran, the world’s largest state sponsor of terrorism.” The United States is thus only likely to push back against this partnership which threatens its energy and security interests in the region.

The United States is not the only power threatened by this agreement though and stakeholders like India are facing significant challenges as well. China has for the past few years now, sought to constrain Indian activities in the Indian Ocean and increase its own influence in the region. In an attempt to flank India, China has not only used Pakistan but also increased its naval presence in the Indian Ocean and invested in key states across the region. According to the agreement, China would gain access to Jask, a major Iranian port outside the Strait of Hormuz, where it would lead military training and exercises, conduct research and jointly develop weapons. According to analysts, China’s access to this port may reduce the importance of the Chabahar Port, which India has been jointly developing for the past few years. Developments at Jask will also threaten the strategic interests of many other stake holders in the Indian Ocean region. Situated at a critical location in the gulf of Oman, it would possibly play a similar role envisioned for China’s Djibouti base in the Gulf of Aden; a concern for India, the United States and Iran’s Arab neighbours as well. More importantly though, with the new agreement soon to come into being, it is very likely that China may take over the Chahbahar port as well and also possibly develop a link with the Gwadar port in Pakistan.

This is a serious cause for concern for India, as Chahbahar was to serve as a means by which India could bypass Pakistan in transporting goods to Afghanistan and simultaneously develop strong linkages with the rest of Central Asia. While India has set up air corridors with Afghanistan, the Iranian Port was meant to act as a dependable base from which economic linkages and connectivity with the country could be enhanced. China now threatens these dynamics, especially since the new deal may allow it to develop its own economic ties with Afghanistan, a problem that India needs to safeguard against. Increased Chinese investments in Iran would therefore threaten India’s strategic interests in the country. This is not only a perceived possibility but has also shown to be a reality with Iran dropping India from the Chabahar rail project, a strategic transit project which would create a 628 kilometer link from Chabahar to Zahedan and from Zahedan to Sarakhs at the border of Turkmenistan. It would have also provided India with a perfect transit route between Chahbahar, Afghanistan and the rest of Central Asia. The new Iran-China deal has thus come as a massive setback for India, which saw the port as a counterbalance to the CPEC and Gwadar in Pakistan.

It is thus inevitable that many regional dynamics will be altered by this new deal, most of which will be beneficial to Iran and China. Nonetheless, it is to be understood that the partnership has seen criticism across the board. In Iran, many including former president Mahmoud Admadinejad, called it “a secret sell out deal”, comparing it to the Treaty of Turkmenchay, an accord which weakened Persia and ceded massive territory to the Russian Empire. Others have also cited China’s “debt-trap diplomacy”, wherein its heavy investments have left many countries in Africa and Asia highly indebted to Beijing. While this criticism has also apparently coincided with disagreement within the Chinese government, it is unlikely that progress on the deal will be halted. On the Chinese side, this deal is in complete alignment with Xi Jinping’s global aspirations for China and on the Iranian side, Supreme Leader Ayatollah Khamenei has already publicly declared support for a strategic bilateral partnership with China. In the context of Iran’s current desperation, it is therefore more likely than not that the deal will materialize and be pushed through in the Iranian government.

China not only offers Iran a respite from the pressure it is now under, but also provides it with a potentially massive oil market, technology in both military and civilian spheres, and significant opportunities for economic development and growth. On the global stage, China’s membership to the UN security council and stake in other international organizations may provide Iran with a potential political cover as well. In conclusion though, it is important to note that China benefits more from any partnership it initiates, a fact that has now become increasingly evident. Long term plans have shown to be its forte and this 25 year proposed partnership is both a product of, as well as another initiative on that front. Iran is merely another pawn on China’s chess board, a worrisome fact for all those involved in the region. How much of a retaliation can then be expected from the United States and others against this partnership; and will a backlash truly be effective or possibly only escalate tensions in the region and push Iran further into China’s strategic circuit?

Pic Courtesy-Arman Taherian at unsplash.com

(The views expressed are personal)