Altercations in US-Iran relations have taken a heavy toll on the geo-economic standing of Iran. From being considered as an American rival in the region, Iran is also viewed as the prime opponent of the Sunni-led coalition of states in the Middle East.
This conundrum has pushed Iran further behind in the comity of nations and hence the country is continuously suffering at the global political, economic, and strategic platforms.
The depleted economic situation of the country amidst the longstanding sanctions since the Islamic Revolution witnessed a ray of hope in the shape of the Joint Comprehensive Plan of Action (JCPOA) in the year 2015.
Read more: Will Trump return to JCPOA? Iran-US relation conundrum
It was envisaged that JCPOA and its related outcome is likely to alleviate the economic and political stature of Iran. However, despite Iran’s verified compliance, President Trump’s unilateral withdrawal from JCPOA in 2018 and the re-imposition of all sanctions caused fissures in the JCPOA member states and pushed Iran further away from the US and the West.
As for many Iranians, courting with the West for about eight years was a futile effort and a new political spectrum was desired. A new potential partner in the shape of China thus became a compulsion rather than a choice that could serve as leverage in Iran-US relations due to its growing political and economic clout.
Read more: Iran-China’s latest deal and how it can transform Middle East
Sino-Iranian collaboration is being viewed with diverging opinions where one school of thought cites it as a great opportunity for both Asian countries, and the other does not regard it as anything more than a political gimmickry aiming to project Chinese politico-economic might.
Nonetheless, this ‘25 Year China-Iran Strategic Cooperation Agreement’ offers an inflow of more than USD 400 billion from China. Nurturing of friendly bilateral ties between both countries as a result of over seventeen agreements since 2010 amounting to USD 18-20 billion and promise of increase trade to USD 600 billion is projected as a mutually beneficial initiative by both the countries.
Read more: Iran-China to sign 25-year cooperation pact: Tehran
Importance of the agreement
For Iran, this opportunity serves as a huge support for improving its economic conditions which dwindled under the US sanctions. Iran was already suffering from a sharp decline in its oil production, which dropped to around 2.1 million barrels in 2019 as opposed to approximately 3.8 million barrels in early 2018.
Iran is also aspiring to restore the nine percent decline in its GDP and fifty percent money devaluation of 2019 by advancing its relations with China.
This agreement is also likely to serve as a bargaining chip with Europe and the US over easing sanctions and give Iran the desired leverage for choosing its strategic relationship regardless of Western Pressures.
Read more: Biden promotes rights in first Iran sanctions
China on the other hand is expected to secure alternative access to hydrocarbons and increase its influence in the Indian Ocean Region (IOR) in general and world maritime oil routes in particular. This agreement if materialized will be a win-win situation for both countries.
Other miscellaneous facets include investments in Iranian oil, gas, and petrochemicals enterprises to an amount of USD 280 billion, a 12% discount, and options for the first bid to Chinese firms.
Read more: China woos Europe through massive investments
The up-gradation of Iranian manufacturing and transport sectors with an investment of approximately USD 120 billion is also possible.
It will also include the development of a special economic zone in Iran with a probability of shifting Chinese manufacturing to Iran, and the regulation of Iranian Cyber Space by Chinese GPS indicates dependency in cyber and AI domains. This overture has a potential to achieve a military tune in future if deemed necessary.
Iran can become a conduit for Chinese goods for Europe through BRI.
Read more: Iran eyes rapprochement with China against Western bloc
Geopolitical and economic concerns
On the economic front, Sino-Iranian collaboration has yet not shown any significant progress. Critics believe that much like CPEC, this venture will also repeat the damning tale. The anticipated doom of this venture is attributed to wide-ranging sanctions on Tehran.
The Chinese initiative over Iran, if viewed amidst the growing Sino-US economic rivalry, is not likely to be welcomed by the antagonist US and West. Domestic Iranian critiques also believe that economically starved Iran may also bid in Beijing’s favor by handing over its Persian Gulf islands to China which in turn can either take a more militaristic demeanor or the economic colonist tone.
Read more: Iran arrests CIA-run agents, urges ‘destabilizing’ US to leave Persian Gulf
On the geo-political front, this partnership is also likely to face resistance due to the already existent Indo-Iranian collaboration and closeness of ties and Sino-Indian friction.
The convergence of China and Iran will be viewed as a direct threat to Indian regional ambitions as the loss of Indian leverages over Iran will be strategically beneficial to its rival Pakistan which under the ambit of CPEC can integrate Iran. This may also be the precursor in the re-alignment of Iranian strategic orientation away from India.
Read more: How India knowingly dumped Iran
The collaboration of two great powers – China and Russia over the Iranian question is also being viewed with concern by the West as it’s being viewed as a partnership to dominate continental Asia.
China has always been cautious in advancing its relations with other countries where it endeavors to interact with other nations without getting entangled in the political predicaments of the region.
Chinese involvement with Iran will thus be a calculated one, dwelling more on the economic and political advantages for Beijing.
Read more: The Chinese initiative in Middle East
Desired end state
The ambiguity of this Sino-Iranian collaboration is still keeping the other regional and global powers guessing about the possible desired end state.
This agreement, if taken on the face value, is nothing more than the expansion of the Chinese economic footprint. However, strategic, political, and economic concerns of adjoining countries make this agreement the centerpiece of the future geostrategic and economic outlook of the region in particular and the world in general.
Read more: China on path to become largest economy despite the pandemic
Sino-Iranian collaboration in economic and security domains, if it consolidates, can harm American and Indian regional interests. Moreover, the anti-Shiaa bloc of the Middle East is also wary of this new development as the same is likely to strengthen Iran and its proxies.
Sino-Iranian collaboration provides China with a funnel in the Middle East which can further be extended to Central Asia wedging the tight grip of the US and West in the region. This collaboration provides an opportunity for Pakistan to cement its relations with its neighbor and a possibility to extend economic reach – a situation utterly against Indian ambitions.Â
Read more: Great power rivalry: Should Iran choose China, Pakistan over India, US?
The Sino-Iranian collaboration will take its due course to manifest and reveal the true intentions and outcomes. The collaboration based on economic interdependence is likely to increase geostrategic and political frictions within the region as the dependent countries are part of opposing global poles, wherein Iran has to choose between China or India.
The other Middle Eastern states are not ready to see an economically stronger Iran, hence Pakistan has to balance its relationship with the Sunni-led Middle East on one side and its CPEC partner China and Shia-led Iran on the other.
Read more: Pakistan, Iran open new border gateway to boost ‘economic & trade exchanges’
A calculated move by Beijing will strengthen it at the regional level and hence it will emerge as the biggest beneficiary of this agreement followed by Iran, while other nations in the region, having a direct or indirect connection with this agreement, are likely to struggle in balancing the already existent fault lines.
This agreement has thus put the regional and global players in a catch-22 situation, dealing with which amicably assumes paramount importance as any miscalculated move by any belligerent will bring this House of Cards to crumble down on the ground.
The author holds M.Phil Degree in Peace and Conflict Studies and Master’s degree in Art and Science of Warfare from National Defence University, Islamabad. His areas of interest are South Asia. He can be reached at arslanbinshahid@gmail.com. The views expressed in the article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.