Who benefits from China-Iran agreement?

Who benefits from China-Iran agreement?

China and Iran have concluded an extensive strategic agreement, which prepared within the framework of a roadmap for 25 years, is a considerable step for achieving a comprehensive strategic partnership between two Asian powers with many mutual interests. The agreement entails political-strategic, economic and cultural components and is designed to ensure the comprehensive promotion of each aspect of relations between China and Iran in the long run. Modern Diplomacy reports that in the political-strategic dimension (military, defence and security), an attempt has been made to establish close positions and cooperation between the two countries in the form of permanent mechanisms, while promoting exchanges, consultations and close cooperation on issues of mutual interest and agreement in regional institutions.

Strengthening the defence infrastructure, countering terrorism and holding regular military manoeuvres as an exhibition of strength and alignment between the two countries can be considered the most important axes in this regard. Economic cooperation is also one of the main axes of long-term cooperation between the two countries. The internal affairs of the two countries and third countries, and finally the exploitation of Iran’s capacities, including the young and skilled labour force, have been emphasised. Cooperation in the fields of oil, industry and mining, and energy-related fields (energy, renewable energy, etc.) based on national sustainable and environmental development concerns are emphasised in this document. It should be noted that to maximise the geopolitical and geoeconomic benefits, the present agreement emphasises the effective participation of Iran in the Chinese one belt one road project, and in this regard, comprehensive cooperation in the framework of this initiative with the priority of cooperation in infrastructure will be put on the agenda. Emphasis is placed on rail, road, port and air, telecommunications, science and technology, education and health. The agreement specifically underscores the facilitation of effective procedures in economic and trade cooperation, and accordingly, the facilitation of financial and banking cooperation, customs, deregulation, granting facilities by the rules in free trade and special economic zones, strengthening cooperation and Non-oil trades. 

In the cultural dimension, the promotion of tourism, media, academia, various non-governmental cultural institutions are emphasised. U.S. sanctions have sharpened Tehran’s desire to introduce Beijing as a reliable economic and political ally.

Although due to the impacts of Washington’s maximum pressure strategy this agreement looks more profitable to Iran than to China, however, Beijing will strengthen its status as one of the few formal buyers of Iran’s oil, as well as boosting its footprint in the Iranian economy. Moreover, assisting to ensure the survival of the JCPOA presents China with the opportunity to put forward its profile in international affairs and to set the tone in the broader nuclear non-proliferation debates and specifically in solving the dilemma over the JCPOA. The geoeconomic interests in the region are obvious as much of recent strategic discourses have focused on China’s need for energy from the Middle East. China maintains a huge interest in exporting to the region, but also there is also huge enthusiasm in the region for Chinese investment there.

Therefore, in contrast to reluctant European investors, China has proceeded to pour investments into Iran. The latest example was a 538 million USD railway deal. (South China Morning Post, 2017) China under the umbrella of the One Belt, One Road project, is steadily expanding its political influence and investment footprint, including the Strait of Hormuz. Beijing will aim to deepen its involvement in the region building on a long-term strategy that seeks to improve China’s diplomatic and economic influence across the Middle East.

China’s reluctance to act as a security guarantor

The decades-old Saudi–Iranian rivalry and tensions vis-à-vis their regional rival has been once again pushed into the attention.  Considering the Saudi-Iranian tensions, the conventional wisdom is that both sides are far from de-escalation to pave the way for a détente. According to Iran’s Foreign Minister Javad Zarif, “Saudi Arabia does not want to de-escalate and one gets the assumption that Riyadh was operating under the influence of the Trump administration’s maximum pressure campaign on Iran”. (Reuters, 2020) From the Saudi perspective, Iran’s behaviour is reckless and endangers the global economy that Iran must change its behaviour before any dialogues between Tehran and other countries can take place. Recently, Saudi Arabia’s Foreign Minister Prince Faisal bin Farhan told the 56th Munich Security Conference that “Until we can talk about the real sources of that instability, talk is going to be unproductive,” the foreign minister said.” (Reuters, 2020)

Although the China-Iran deal prompted extensive debates in international media, Iran is not the only country in the region to maintain a strategic partnership with China. The GCC states such as Saudi Arabia (since 2016) and the United Arab Emirates (since 2018) do as well. According to the China Global Investment Tracker, Beijing invested up to $62.55 billion in Saudi Arabia and the UAE between 2008 and 2019. (Julia Gurol& Jacopo Scita, 2020) The total amount that China invested in all the GCC states during the same period reaches up to $83 billion. These investments in a technology project, fisheries, oil projects, building roads etc. are all part of China’s Maritime Silk Road project for which the GCC states are strategically important. Trade exchange between China and the GCC countries exceeded $180 billion in 2019, accounting for 11 per cent of the GCC’s foreign trade. In 2020, China replaced the EU as the GCC’s primary trading partner. This exemplifies an enormous transformation from 1990 when diplomatic relations were first inaugurated between Saudi Arabia and China; at the time, China-GCC trade was slighter than $1.5 billion, representing only 1 per cent of the entire volume of Persian Gulf Arab States trade. (Julia Gurol& Jacopo Scita, 2020)

Due to the contemporary cycle of incidents in the Strait of Hormuz that intensified tensions, China could be compelled to take on a greater security role to preserve the freedom of navigation which is necessary to its energy security and flow of oil supplies through the Persian Gulf. However, regardless of the existing regional tensions and the high risk of military conflicts lately threatened by Trump, China is quite reluctant to become bogged down in the regional tensions and attempts to avoid a military conflict. China’s reluctance to act as a security guarantor in the Persian Gulf indicates that its comprehensive power in the Middle East is not yet well-defined. (Job B Alterman, 2013) Beijing seems unlikely to proclaim any peace initiatives for Persian Gulf security beyond broad calls for peace in the region probably maintaining China’s existing policy of non-interference. From China’s perspective, its contribution to the regional developments through bilateral agreements and the BRI is the best way for stability. Thus, it is fair to say that China has played almost no role in easing geopolitical tension between Iran and the GCC.

Conclusion 

Hence, Iran is an essential partner to Beijing’s economic projection in the Middle East. China and Iran aim to maintain regular mechanisms for genuine dialogue on all mutual issues. However, the GCC states aim to restrain China’s support for Iran. Nevertheless, 

China will not shape any one-sided relation neither with the GCC nor with Iran. By avoiding partnerships in favour of its bilateral ties with Iran or the GCC, China remains keen to balance its relations with all regional powers. By circumventing direct involvement in regional battles, China aims to further expand its economic and military activities in a highly strategic region, securing the flow of oil exports desperately needed under a competitive atmosphere without being bogged down in the upheaval of political and security confrontations in the Persian Gulf. 

With China being present now in the Persian Gulf, Washington will have to acknowledge China’s interest. China is questioning the current security architecture of the Indian Ocean region. It would finally thwart the US and India’s role as a net security provider in the Persian Gulf and the Indian Ocean, diminishing their role and geographic advantage. 

Through the agreement with Iran, China can maintain a sustainable presence along the Strait of Hormuz and it would effectively have a credible presence across two key chokepoints in the Indian Ocean, together with Bab-el-Mandeb. Chinese presence along the Strait of Hormuz would legitimise Beijing’s overseas bases to guard its maritime interests which would lend credence to Beijing’s claims of being a responsible global actor. 

As far as regional security is concerned, the prospect of a wider conflict in the region will jeopardize not only oil exports but also risks scaring away overseas investors, while Iran and most of the GCC states need fresh capital, cutting-edge technology and management know-how. It appears that a sustained and inclusive dialogue on the Persian Gulf security with the support and mediation of external actors such as China would envisage practical measures to gradually build trust and expand cooperation. Such an inclusive mechanism could evolve into a regularised, confidence-building platform that addresses both the issue-specific challenges and broader questions about security in the Persian Gulf. 

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