The Iran-China deal just did not happen overnight as it has been in the works since 2016, and at the time it was considered as a comprehensive strategic partnerships while the Iranians were negotiating the agreement.
Fast-forward to March 2021, China signs $400 billion investment deal with Iran for 25 years. Before going into the details, let’s shed some light on China-Iran relations.
Iran is the world’s fourth largest oil producer; it holds 10% of the world’s oil reserves. China is one of the oldest allies of Iran and the largest trading partner. China already imports between 300,000 to 100,0000 barrels of Iranian oil every day. The latest figure for shared annual trade between the two countries lately stands at roughly 20 billion dollars.
Back in 2016 when the deal started to take shape, both countries agreed to boost trade to 600 billion over a period of 10 years. The most obvious reason that binds the two countries together is that both have very complicated and fraught relations with the United States. Also, both nations are faced with various embargoes and sanctions imposed by the United States from time to time.
What does the deal hold?
The current deal was signed at Iran’s capital Tehran, that sided with the 50th anniversary of the establishment of diplomatic relations between China and Iran.
Iran has signed-the first of its kind-a long term agreement with a major world power. The current deal between Iran and China will further deepen their political and economic alliance that can have some lasting impact on the new geo political scenario in the region where China seems to flex its muscles.
According to the draft, $400 billion worth of Chinese investment is to be made in dozens of fields, including banking, telecommunications, ports, railways, health care and information technology.
China would receive a regular supply of heavily discounted Iranian oil to keep its economy going and diversify its energy demands.
Not to mention the draft also called for deepening military cooperation, including joint training and exercises, joint research and weapons development and intelligence-sharing that will certainly raise many eyebrows in the West and Middle East. The strategic interests of both the countries in their respect domain will get a boost from this deal.
Let’s first turn our attention to Iran. Iran reached a nuclear deal termed as, Joint Comprehensive Plan of Action (JCPOA) with P5 +1 (China, France, Russia, United Kingdom, Germany & the United States) on July 14, 2015.
The nuclear deal was endorsed by the UN Security Council and as per Iran’s compliance with the deal many economic restrictions were lifted, as a result many European companies started stand-alone businesses or joint ventures with Iranian companies in gas and oil fields.
But the United States under Trump administration withdrew from the nuclear deal on May 8, 2018 and re-imposed sanctions on Iran unilaterally without consulting any of the other member states of JCPOA. The United States did not give any details or evidence of any noncompliance by Iran for its withdrawal from the deal, nonetheless Iran for almost a year did comply with the original JCPOA agreement.
Ever since Trump became President, Iran has been under tremendous pressure and even the Biden administration is not letting off the pressure.
No country and no economy can grow under years of economic sanctions and Iran has been under this immense pressure for years and as a result its people have suffered a lot. With the new deal with China, it will give a boost to Iranian economy and also on the other hand, give some leverage to Iran in restarting the nuclear talks or re-joining the JCPOA on pre-trump era conditions.
President Rouhani himself has voiced his appreciation of Beijing’s support for Tehran’s position on the accord saying, “Cooperation between Tehran and Beijing is important for the implementation of the Joint Comprehensive Plan of Action and European commitments to the deal, that can change the existing conditions.”
The Biden Administration has signaled that they want to start the negotiations with Iran but first would like to see some concessions. But now Iran has a new deal with China and may have an upper hand in the future negotiations with the United States. Though we have to wait and see how other players read the new deal and respond.
Moreover, Iran has rightly been waiting for the West to come to its rescue or rely on it for lifting the economic sanctions but they have failed to deliver and now Iran is leaning towards the East.
It is also a signal to the United States and Western countries that, if they keep taking unilateral or biased decisions against Iran, then it has no choice but to join the Eastern camp consisting of China & Russia – United States arch rivals.
West’s undue criticism of China
China feels that it has been a victim of undue criticism from the United States and the West, that being China’s economic rise, its growing influence in East China sea, The Hong Kong issue, or how it conducts business in Xinjiang province and the Belt & Road Initiative.
Joe Biden a week ago in White House told reporters that, “China has an overall goal … to become the leading country in the world, the wealthiest country in the world, and the most powerful country in the world. “That’s not going to happen on my watch because the United States is going to continue to grow.”
On another front China has to deal with Quadrilateral Security Dialogue (QUAD) which is an informal group between the United States, Japan, Australia and India. This group is widely viewed as a response to increased Chinese economic and military might in the South China Sea. The United States has recently been very keen to include South Korea, New Zealand & Vietnam to keep China in check.
So, for China the new deal with Iran is like a tit for tat action and that has far reaching implications in the Middle East.
Chinese people in general, as we have seen from their reaction in Beijing, have not been very happy with the negative press in the West, particularly about the problems in Hong Kong and Xinjiang province, where there are many concentration camps, though the Chinese call them re-education camps. Many Chinese companies and officials have faced economic sanctions from the west and it believes it is a wild witch hunt.
China is investing heavily in Iran and if it wants to keep doing business while there are no additional sanctions on Iran, it will hope that Iran does not use the extra money to level up its nuclear capabilities because it will create more problems than solve any. China though on the other hand has made it clear that it does not intend to target any other country through this deal.
The Chinese retaliation
A lot has been happening in the first quarter of 2021, the United States under the Biden Administration is realigning itself with their transatlantic allies and trying to undo the damage done by the Trump Administration.
The European Union, the United States, United Kingdom and Canada, all almost at the same time, imposed sanctions on China in response to the Human Rights abuses in Xinjiang.
Chinese in retaliation also sanctioned British parliamentarians, European Parliamentarians and even their families. More so the Chinese even sanctioned a German think tank and in other words trying to suppress freedom of speech, which is a basic right in the western democratic countries and will have more ramifications down the road.
Chinese foreign minister recently visited Saudi Arabia, Turkey, Iran, UAE, Bahrain and Oman. All these countries have signed on to China’s Belt and Road Initiative. China wants to be a major player in the middle east and even Iraq, Kuwait, Lebanon, Qatar and Yemen are on board the Road and Belt initiative also.
China has directly avoided taking sides in the multi-sided conflicts in the Middle East which is a good strategy, as UAE is one of the largest trading partners. Also, China receives oil from almost all the countries in the region, hence China does not want to jeopardize its relations with Middle Eastern countries especially Saudi Arabia vs Iran and saying that it is simply in it for economic reasons.
Read more: The Chinese initiative in Middle East
A new cold war era?
Nevertheless, China is trying to cement its place in the Middle East and fill the vacuum if the United States ever abandons the Middle East and the war in Syria. But having said that, I still believe that the United States would never leave the Middle East even if it wanted to, on the pretext that China will gain more influence in the region.
Though the China-Iran deal has not been made public on China’s insistence even though the Iranians wanted to make it public, there are reports that there is going to be defense and security cooperation between the two.
Iran is already involved in the multi-sided conflicts in the Middle East and if the above materializes then the United States has another major player in the Middle East involved directly or indirectly or one may say a rival along with Russia.
All depends on how the Biden administration perceives this new reality and handles it tactfully involving other European Allies or take unilateral action to make things worse.
I believe and who knows we may be entering a new cold war era if the big power players don’t act wisely or let go of their ego and supremacy.
I would like to end with a quote from Winston Churchill, “We have no lasting friends, no lasting enemies, only lasting interests.”
Sultan Suleman is Director at SS Headway Consulting, Seoul, S.K. He is a motivational mentor and entrepreneur. Views in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.