Iran China strategic pact
On Saturday, 27th March 2021 China and Iran signed a key agreement which is being reported as a ‘strategic cooperation pact’. As part of the deal, Beijing has agreed to invest over $400 billion in fields such as banking, telecommunications, ports, railways, and information technology. Tehran would reciprocate by ensuring a steady supply of oil at a heavily discounted price to the power-hungry Dragon.
The strategic agreement is seen as the larger game plan of Xi Jinping to enlarge Chinese influence in the middle east region which has long been a sphere of America. The deal comes at the backdrop of Chinese foreign minister Wang Yi’s visit to the region through a planned 6-country tour. He has already travelled to Saudi Arabia, Turkey and in the days ahead he visited United Arab Emirates, Bahrain, and Oman.
What prompted the endorsement of the agreement?
Iran’s case
The strategic agreement between China and Iran was first proposed by Xi Jinping back in 2016 but the Iranians were not as enthusiastic about the deal and it is evidenced by the fact that it took 5 years for the two countries to come to an agreement.
The main factor which seemed to have influenced Iran’s readiness to shake hands with China is the US unilateral withdrawal from the Joint Comprehensive Plan of Action (JCPOA) which resulted in sanctions. US sanctions not only hurt Iran’s oil output but also its economy. For instance, Iran’s oil production was about 3.8 million barrels per day in 2018 out of which 2.3 million barrels was being exported. Although for the first six months waivers were given by the Trump administration but on the condition that the said countries reduce their dependence on Iranian oil. By October 2019, the oil production had reduced to 2.1 million barrels per day and about 260,000 barrels was being exported.
In the above graph we can clearly see that the Iranian economy has entered recession because of sanctions and in addition to that, the unemployment rate has risen to about 12.5%.
China’s case
The two countries already signaled their desire to form a comprehensive strategic partnership when Chinese premier Xi Jinping visited the nation back in 2016. The two main reasons why Beijing has decided to form 25-year strategic agreement are: firstly, the dragon’s needs for oil to fulfil its energy requirement. Secondly, Tehran is a vital partner under the belt and road initiative and in addition to that, it seeks to make inroads in the middle east region. The agreement could be considered a win for Beijing as it would not only allow it to secure its energy needs but also allow expansion in the region which has long been dominated by the United States.
Source:https://iranprimer.usip.org/blog/2019/sep/11/irans-increasing-reliance-china
The chart clearly communicates the fact that the two countries’ bilateral trade has been increasing since the 1990s. For instance, the total two-way trade accounted for less than a $1 billion in 1992 and reached a peak high of about $50 billion in 2015.
Chinese state-run energy company Zhuhai Zhenrong corporation faced sanctions after it knowingly bought Iranian oil when the Trump administration-imposed sanctions on Iran after withdrawing from JCPOA. With the strategic agreement in place Beijing may be able to kill two birds with a stone as it would permit them to import oil and to safeguard the interests of its enterprises.
US influence on Iran-China ties:
The Iran-China 25-year cooperation agreement comes at a time when US ties with both Iran and China are strained and the shared animosity between the sides could be attributed to Trump administration’s policies. The first disaster was the decision to withdraw from the JCPOA unilaterally despite Iran adhering to all the commitments under the agreement. This policy not only failed to deter the Iranians from going forward with their nuclear program, but it could have influenced Tehran’s decision to shake hands with Beijing.
Secondly, former President Donald Trump’s bellicosity led to the US-China trade war which has not only costed the American economy about 300,000 jobs but also 0.3 % of real GDP according to a 2019 study by Moody Analytics. Also, recent studies have shown that US companies suffered due to the tariffs and the estimated cost of such a maneuver was about $46 billion. US trade war with China and re-imposition of sanctions on Iran could have influenced the decision of the two sides to come together.
More recently, Iranians rejected US President Biden proposal to restore the commitments it had agreed to when JCPOA was formed and instead demanded that the sanctions be lifted first. The challenge for the Biden administration is to find the right balance which would help convince the Iranians to adhere to the commitments set out in the agreement.
Moreover, the US ties with China under President Biden are also strained as the administration considers China a peer competitor which was confirmed by Secretary of State Anthony Blinken when he said that ‘China is the only country with economic, diplomatic, military and technological power to seriously challenge the stable and open international system’.
Tehran and Beijing relations were cordial even before US misadventures began under Trump and but the recent US policy vis-à-vis the two countries could have brought them together.
China’s challenge to the United States:
It seems the Iran-China strategic pact is just one of the cards in the Chinese premier’s pocket and through this agreement Beijing would be hoping to make inroads in the middle east, a region which has been under American influence.
Chinese foreign minister Wang Yi’s is on a tour to the region which began with key US allies Saudi Arabia and Turkey, the strategic pact with Iran was signed in the aftermath of the visit. Post Iran, he visited United Arab Emirates, Bahrain and his tour ended with a visit to Oman. At a time when US President Joe Biden is planning to hold a ‘Summit for Democracy’, China seems to have upped its ante and the Iran-China strategic pact clearly demonstrates its attempt to challenge US supremacy in the middle east.
China’s aggressive foreign policy is at play here as it the Wang Yi not only completed a tour to the middle east region, but China also entered into a long-term agreement with the Islamic republic amid deteriorating US-Iran ties. The Dragon is signalling to America that the days when it was careful with regards to relations with Iran are over and the pact succinctly displays its attempt to challenge US influence in the region.
The strategic pact is a win for Beijing as it would not only allow the country to fulfil its energy needs through oil import but also expand cooperation in political, economy, and military realm. The recent development would also allow China to showcase that without it, US would not be able to get Iran to commit to the terms of JCPOA.
Conclusion:
Iran and China already had booming ties, but the US policy with regard to Iran under Donald Trump seems to have influenced the decision of the two sides to come together. The main factor for Tehran shaking hands with Beijing is America’s unilateral withdrawal from the JCPOA which lead to imposition of sanctions. The result by the American maneuver has been two-fold, one being Iran enriching uranium in clear breach of the 2015 nuclear accord. Secondly, Iran’s economy has taken a severe hit as the gains from JCPOA have been wiped out in the form of losses in oil revenue and rise in unemployment levels.
As far as China’s case is concerned, the strategic pact allows it to fulfill its energy requirements and in turn get closer to Iran who is a vital partner in its belt and road initiative. It looks like Iran is a steppingstone for the dragon to challenge the elephant in its sphere of influence.
End Notes
2)https://www.nytimes.com/2021/03/27/world/middleeast/china-iran-deal.html
3)https://www.bbc.com/news/av/world-us-canada-44044350
5)https://www.bbc.com/news/world-middle-east-48119109
6)https://www.cnbc.com/2021/03/23/these-6-charts-show-how-sanctions-are-crushing-irans-economy.html
7)https://www.globaltimes.cn/page/202103/1219683.shtml
8)https://iranprimer.usip.org/blog/2019/sep/11/irans-increasing-reliance-china
9)https://www.aspistrategist.org.au/iran-china-strategic-agreement-could-be-a-game-changer/
10)https://www.nti.org/learn/countries/iran/nuclear/
11)https://www.haaretz.com/israel-news/.premium-trump-and-netanyahu-s-maximum-pressure-on-iran-yielded-minimal-results-1.9667477
13)https://www.voanews.com/usa/china-worlds-greatest-geopolitical-test-blinken-says
16)https://www.justsecurity.org/75462/the-digital-technology-agenda-at-the-summit-for-democracy/
Pic Courtesy -Mehrshad Rajabi at unplash.com
(The views expressed are the personal views of the author and do not represent the views of CESCUBE.)
Abhijeet Nehra is a M.A. International Relations from University of Sheffield and has done his graduation in Global Affairs from Jindal School of International Affairs, O P Jindal Global University . He was research associate with CESCUBE.
