Sitwat Waqar Bokhari
Beijing and Tehran signed a game-changing pact this month agreeing to establish comprehensive bilateral cooperation in the sectors of not only trade and economy but also politics, culture, and security, worth $400 billion of investment over the next 25 years. The opening paragraph of the pact names the two parties as two ancient Asian cultures forming a strategic partnership, emphasizing similarities in the outlook of both in many mutual bilateral and multilateral interests. While not a sudden response to President Trump’s aggression on Iran, plans to form such a partnership were publicly agreed upon between presidents Xi and Rouhani in 2016.
In fact, the Sino-Iranian relations harbor a long history of geopolitical and economic cooperation. Dating back to the dual-containment policy of the US targeting Iran and Iraq during Clinton’s administration, China provided a major buffer to Iran against international pressure. Later, during the eight-year long war between Iran and Iraq, China provided ample support for Iran’s fledgling arms industry while also remaining its largest source of military wares. In the recent decade-long nuclear stand-off between the US and Iran, again, when international sanctions against Sino-Iranian were at their peak, China purchased 54 percent of Iran’s oil through alternative financial arrangements.
The recent pact only manifests Iran’s expected turn to the East in the wake of the increasing irrelevance of the West in Iran’s long-term foreign policy orientation. Though, interestingly, it also comes at a time when the world is struggling with a debilitating pandemic while China continues to cement its dominance in the region and expand its strategic and economic objectives.
Clearly, while the US approach of applying maximum pressure with stringent sanctions on Tehran did lead to immensely crippling the Iranian economy, it failed at its intended purpose of curtailing Tehran’s drive for a nuclear weapon and isolating the country. Taking full advantage of the US-Iranian tensions, China cashed in on the opportunity as China’s own relations with the US also took a heavier strain. While the deal is mutually beneficial for Sino-Iranian as it provides the oil-rich but sanctions-struck Iran with a market for its crude oil supply, it benefits China manifold, particularly by allowing it to secure land routes from Sino-Iranian to meet some of its crude oil needs at a much discounted rate but also exerting its influence further in the Gulf.
As the second-largest economy and the largest importer of oil in the world, China gains much from investing in Sino-Iranian as it will pave the way for China to solidify its foothold and expand its presence in almost every sector of the Iranian industry, including energy, ports, railways, telecommunications and banking. The China-Iran agreement will allow the economic giant to advance its Belt and Road Initiative and expand its strategic influence in the Gulf even in the event of a regime change in Iran as bilateral agreements as these are governed by international law, rarely hindered by regime changes.
The only downside for China is the possibility of US sanctions hitting Chinese firms that are doing business with Sino-Iranian. In fact, according to the US State Department’s spokesperson speaking to The New York Times, the United States will impose costs on Chinese companies that aid Iran. However, the Chinese economy is in a much better position as China’s gross domestic product has grown by 3.2% between April and June 2020 while other countries have faced a much severe economic decline in the wake of the prevailing pandemic.
For Iran, whose economy is on the verge of collapse, due to inflation and unemployment while the coronavirus pandemic has done little to improve the situation, the Iranian authorities have entered the negotiations with China from quite a weaker position. As a result, China not only gains a discounted supply of oil by as much as 32 per cent but the security cooperation under the Iran-China pact could advance into Chinese troop deployments in the Persian Gulf and the possibility of the transfer of the islands located there to China’s control. While China, being Iran’s top trading partner since 2010, may be its important economic lifeline, commerce for Iran has been greatly affected by US sanctions. Even though China may ignore the restrictions and continue to trade with Iran, the Iranian oil imports had dropped by a massive 89 percent between 2019 and 2020.Â
Nevertheless, Iran also gains immensely from the security umbrella that its partnership with China would provide it. Though, with China’s imminent increase in the presence in the Gulf, it remains to be seen whether China would play the role of balancing the tensions between Iran and the GCC countries, particularly, its arch-rival and US ally; Saudi Arabia. It is pertinent to note that Beijing aims to cooperate with all states in the region, including US partners, and already has comprehensive strategic partnerships with Saudi Arabia and the UAE.
For the US itself, clearly, by making the Iranian regime more desperate and provocative, the collateral damage has expanded to include opening avenues for its adversaries to strengthen their bonds with each other and form mutually beneficial strategic partnerships. Its Asian strategic ally, India, too, being already at loggerheads with China due to heightening tensions between the two on their borders, gets affected by the pact as in recent years Iran has not balked at openly leveraging both China and Pakistan as potential investors for the Chabahar port, challenging India’s public narratives which termed Chabahar as an India-exclusive project.
In fact, as reported in The Hindu, Iran also recently withdrew from the rail project from Chabahar to Zahedan with India on the grounds of delays in the finances. Interestingly, Iran debunked the rumors, claiming that such an agreement never existed. Certainly, it appears, the emerging strategic partnership between the two Asian powers has ruffled feathers for many of Iran’s adversaries. Now it remains to be seen how it will play out for the future of Iran in the region, vis-a-vis particularly also its rivalry with Israel, as the country would recover from the brunt of the sanctions and achieve some economic stability over the next 25 years.
The author, Sitwat Waqar Bokhari, is a Research Fellow at the Center for Research and Security Studies (CRSS) and a Program Manager for Afghan Studies Center (ASC). She tweets @SitwatWB.
