Iran-China Deal

Written by Rooha Javed 11:47 am Articles, Current Affairs, International Relations, Published Content

The Iran-China Deal of 2021: 25 Years of Cooperation in Energy, Infrastructure, & Telecom

The increasing cooperation between China and Iran is seen as a threat by the United States, and by Iran’s rival oil exporters. The Iran-China deal (signed in March 2021) will further consolidate these relations and ensure China’s involvement in the region for the next 25 years. The author, Rooha Javed, notes that as a part of this deal, China will invest in Iran’s infrastructure development, oil and petrochemical industry, and telecommunications. She asserts that the Iran-China partnership can already be seen in China’s inclination towards reviving the Joint Comprehensive Plan of Action (JCPOA), and its current infrastructure projects in Iran.
About the Author(s)
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Rooha Javed holds a master's degree in international relations and is currently performing a job as a visiting lecturer.

Iran-China Relations

The cooperation development between China and Iran is deepening the concerns for many states, particularly the US, as their relationship destabilizes regional interests and fabricates threat issues. Eventually, President Xi Jinping proposed an Iran-China deal on his visit to Iran in 2016, which was accepted by the then Iranian president, Hasan Rouhani.

However, the alliance shift of China towards Iran is, reportedly, a rhetoric initiative for future developments between both states. Recent Iran-China developments can be seen after the revival of Iran’s nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), in the Vienna talks. The nuclear talks have taken place in seven rounds but no significant breakthrough is happening.

During the seventh round of the Vienna talks, China started embracing the Iranian JCPOA deal by increasing Iranian oil imports. Like the United States, China is concerned about Iranian proliferation, but it is content to be a bystander in international attempts to restrain Iran. Additionally, China has also shown rhetorical support to Iran in the revival of the nuclear agreement and against the US sanctions.  

The Deal Boistering Iran-China Relations

China and Iran have been secretly drafting economic, strategic, and security deals for the next 25 years, explicitly strengthening Chinese investment in energy and other industries. The Chinese investment in the oil and petrochemical industry alone is worth almost $400 billion. China has also planned to invest in telecommunications, banking, railways, ports, and many other different projects according to the resources.

According to Iranian officials and oil traders, a significantly discounted and regular supply of Iranian oil would be exchanged for the next 25 years, and China would benefit as a result. The Iran-China deal also shows that deep military cooperation and relations are giving footholds to China in a region that has been the strategic hub for the US.

In describing the US, its concerned preoccupation in the Middle East is the advancement of intelligence sharing, joint training, research, and military promotion and development, mainly to curb terrorism, drugs and human trafficking, and trans-frontier crimes.

Amid rising tensions, the foreign minister of Iran, Hossain Amir Abdullahanin, visited China on 14th January for closer ties and the fulfillment of the 25-year Iran-China strategic cooperation deal for further implementation. The desired areas discussed from the Iranian side were mainly the expansion of trade, advancement of security, and fighting COVID-19.

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But after the US withdrawal from JCPOA, Iran is looking towards the East by acquiring a “Look East” policy, whereas China is holding significant relations with Iranian archfoes such as Israel and Saudi Arabia. Meanwhile, the Vienna talks are whirling around the main parties, Iran and the P5+1 states, and reflecting the contribution of the US-allied and Iran-rival states at the same time.

On the other hand, China is taking prudent strategies forward in making relations with Iran, only to escalate economic development and reinforce global engagement by not giving entire contrivances to the single state (Iran). The Iran-China deal, drafted on 18 pages, has predicted that Iran would gain maximum Chinese investment, economic, military, and political cooperation; however, China has maximized oil imports from Iran.

By importing immoderate oil imports, China has still not invested enormously in production in Iran even though both governments have penned down low stakes deals since last year—such as cooperation in the advancement of cinema, museum, the opening of the Chinese consulate in Iran’s Bandar Abbad Port—to boost trade.

The relationship between the US and China has soared after forty years of normalized relations since establishing diplomatic ties. The US envoy to Iran, Rob Malley, visited the International Atomic Energy Agency (IAEA) and JCPOA signatories whereas, China and the US turned their backs towards each other. This has indicated the tension between the US and China relations, leading to China’s uncertainties towards the revival of the Iranian nuclear deal.

After the denial of talks on the nuclear deal, China shows no desire to play a vital role in Iran’s chapter of the nuclear negotiations. China has allowed Russia, ostensibly, to take part in the talks and the supplemental decisions, in which China would back Russia. China also played a vital role in signing the Iranian nuclear deal from 2013 to 2015, under the presidency of Barak Obama.  

Whereas, under the presidency of Trump, the Iranian nuclear program was halted and came under crippling sanctions, affecting the economy of Iran woefully. Furthermore, the Iranian economy has been suffocated in response to renewed American sanctions, including the threat to shut off access to the international banking system for any corporation that conducts business in Iran. As a result of these sanctions, Iran moved towards China for cooperation, considering the latter is the world’s largest importer of oil, strengthening the Iran-China relations.

As a result of China’s attitude, Iran is not subjected to any sanctions and should have access to nuclear energy, but it is also opposed to nuclear proliferation and supports international control as a solution to the nuclear problem. Despite Iran’s intention to return to the JCPOA, China has been unwilling to endorse certain new conditions, including the withdrawal of sanctions before discussions. China has pressured Iran to make good on its promised concessions and return to the bargaining table as quickly as possible despite its apparent backing.

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China-Iran Stance on the US Sanctions

The US’ rising tensions and sanctions on Iran and China have tied them in diplomatic relations. In the present time, China’s “wolf warrior diplomacy” has presented its enthusiasm towards a policy of expansion with maximum gains. In this regard, China criticizes US behavior towards non-allied states, mocks the US’ decline, and threatens penalties for defying China. 

China has also shown intense agitation towards the US sanctions on Iran. Moreover, China has been importing Iranian oil in blatant violation of the US laws since Donald Trump assumed power, and it has only increased during President Biden’s term. Meanwhile, the current US president, Joe Biden, has viewed not imposing sanctions as a good gesture towards both China and Iran.

Although China’s temporary sanctions waiver expired in April 2019, several experts believe that the country is still importing significant quantities of Iranian oil through various means of evading sanctions. As China continues to pay for oil in renminbi (RMB) to counter the US restrictions, the central bank of Iran has made the renminbi (RMB) its primary foreign reserve currency.

According to the official Chinese data, the purchase of oil by China decreased in 2019 and faced exacerbating sanctions imposed by the US, and China lost access to the US central bank in making economic relations. The US sanctions against Iran have also impacted China’s interests on the commercial level, pushing out Chinese companies, prominently technology firms, businesses, and other activities from Iran. Huawei, a Chinese telecommunications company, reportedly fired most of its 250 employees in Iran in March 2019.

China: Contemplating Iranian Oil & Natural Resources

As China’s energy consumption is likely to peak in 2025, 2035, and 2040, its growing interest in the Iranian energy and mining industries aims to help meet its rising energy demand. The revolting sanctions have forced Iran to depend more on its trade with China and provided enticing refunds on crude oil imports that may have reached $1 per barrel.

With a fast-expanding energy demand, China is one of Iran’s and its Arab competitors’, most crucial oil and gas customer, despite its stated desire to minimize its dependency on oil from the Middle East. The official energy imports of China to the Gulf nations were rebalanced when exceptions to the US sanctions expired in 2019. Other than Iranian oil, Chinese industries have also invested in other natural resources, such as gold, aluminum, and copper manufacturing, to ensure a steady supply to China.  

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China’s Infrastructure Drive

China is rising by developing a long-term policy that invests and connects with the states through trade routes, famously known as the Belt and Road initiative (BRI). Iran is an important regional crossroad because it intersects Central Asia, the Middle East, and Europe.

China has invested in Iran’s domestic and international transportation infrastructure as part of the Belt and Road Initiative to enhance the country’s connectivity. China’s Central and West Asia Economic Corridor – a part of the BRI – travels through Iran to Europe, connecting the country to China via Kazakhstan, Kyrgyzstan, Turkmenistan, Uzbekistan, and Tajikistan.

More profoundly, China seeks to strengthen regional connectivity to keep vital Chinese commodities moving in other regional markets without hindrances. In 2018, China, allegedly, launched railway links between Inner Mongolia and the Iranian cities of Tehran and Bam, decreasing transit time by 20 days compared to the marine alternatives, building on existing Central Asian freight train connections.

Although since 2013, data has shown that Iran could have secured only $13 billion from Chinese investments, Beijing has funded and built national lines that connect Iran’s interior with more extensive regional networks to encourage infrastructural development within the country. Additionally, China is also excelling via railway tracks, in which it has invested $845 million in a contract with Iran to connect Tehran with the western cities of Iran—Hamedan and Sanandaj.

Although Chinese enterprises have made significant investments, Iran now has much-needed infrastructure. According to the World Bank model presented in 2019, investments in BRI transportation infrastructure could boost Iran’s GDP by 6.18%.

Conclusion

In conclusion, China aspires to expand its international sphere of influence and increase its military strength. It appears that China wishes to maintain cordial relations with all countries. Increasing trade and regional stability are also high on China’s agenda, as is the Belt and Road Initiative. China’s present stance may favor cordial Iran-China relations, though it may be due to the recent tensions with the US and the COVID-19 outbreak in the country.

The 25 year-long Iran-China deal is capable of progressing the Chinese global positioning, certainly, shows the signs of being a cyber, military, or strategic security threat to the competing states. However, the Iranian nuclear deal could secure its atomic program, but China shows ultimate success over allied and competing states by connecting and investing through BRI.


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The views and opinions expressed in this article/paper are the author’s own and do not necessarily reflect the editorial position of Paradigm Shift.

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