Iran-China Deal, BRI Accomplishment

On March 27, the Chinese Foreign Minister Wang Yi and his Iranian counterpart Javad Zarif inked the $400 billion agreement in Tehran, which spreads over 25 years encompassing telecommunications (5G), infrastructure, banking, free trade zones as well as a vast expansion in military cooperation. In exchange, China will benefit from a steady and secure supply of discounted oil to cater to its ever-increasing needs. This latest development is another feather in the cap of the Chinese multi-billion-dollar Belt and Road Initiative (BRI) and at one end it will help alleviate the downtrodden Iranian economy while on the other hand, it provides China with a strong foothold in the Middle East and serves its import/export diversification agenda.
The Iran-China relations have been progressive since the official recognition of the People’s Republic of China by the Iranian Empire in 1967 and the establishment of diplomatic ties in 1971. The Iranian revolution in 1979 seemed to be a stumbling block in the positive relations between both nations but after the outbreak of the Iran-Iraq War, where the US and USSR both were supporting the Iraqi regime, China choose to back Iran and provided with material support. This move paved the path for fraternal relations between Iran and China in the future. As Supreme Leader Ali Khamenei said, “In cooperating with other countries, we prefer to deal with countries for which our nation does not harbour bitter memories”.
The BRI, apart from being the biggest developmental projects and an engineering marvel of this century, is objective is to embrace landlocked states in Central Asia, establish land connections with Western Asia, Europe, as well as African partners. In addition to this, it is a scheme to become independent from naval powers, especially the US Navy, which controls all strategic points on the maritime route connecting East Asia with Southeast Asia, South Asia, Africa, and Europe. The Middle East region in this regard is the most important piece of the jigsaw puzzle after South Asia. As Ben Simpfendorfer writes in his book ‘The New Silk Road: How a Rising Arab World is Turning Away From the West and Rediscovering China’, that “Silk Road is about more than a trading route. It is about the historical, geographical, and religious ties that have bound the Silk Road economies together. The rise of China, the rise of oil prices, and the events after September 11 have reinvigorated them, making the Silk Road relevant once again.”
The Middle East, including Iran, constitutes a core part of the new Chinese project. Andrew Scobell quite rightly points out that the region “has become of greater importance to China than ever before. Indeed, Beijing now seems to perceive the Middle East as an extension of China’s periphery as well as a zone of fragility. Moreover, China has become concerned about the stability of regimes in the region after being largely agnostic for many decades”.
A few years ago, the question that whether China and Iran have convergent or divergent interests will decide the fate of their relationship in future and prospects of BRI expansion. However, the recent development shows that both states share a common goal and Iran plays a leading role in the ongoing process of regional integration and is, therefore, a desirable political ally for China. Since 2010, Iran has gained more than any other regional power and its increasing influence in Syria, Iraq, Lebanon, Yemen and Qatar shows the country’s soft power. From the Iranian point of view, the active participation and engagement in the BRI can only further enhance its regional role.
The current level of Iran’s relations with the People’s Republic of China could be described as positive and constructive. Their political cooperation was limited in the past, but now both states are cooperating. A pragmatic alliance of both nations is a result of the political pressure from the West, as well as an economic necessity because both perceive the US presence in Asia as a threat to their national security. For this reason, the PRC and Iran undertake activities that aim at limiting the U.S.’s sphere of influence in the Middle East, Central Asia, East Asia, and Southeast Asia. Moreover, this is the main reason why their policies are also attractive to the Russian Federation. This powerful political trio has an almost unlimited political potential to block any American or any other Western initiative in Asia. Moreover, China sells military equipment to Iran and both states cooperate on a number of security issues.
During President Xi’s visit to Tehran in 2016, he stressed that China and Iran were natural partners as far as the implementation of the Belt and Road Initiative was concerned. He also called on both sides to boost cooperation in infrastructure, interconnectivity, production capacity and energy in the framework of the BRI. In response, Ali Khamenei said that Iran would push the bilateral practical cooperation to a new high. Soon after that Xi met President Rouhani and signed 17 multi-billion-dollar agreements.
On the sidelines of the BRI forum for international cooperation 2017, China’s Finance Minister Xiao Jie openly declared: “Iran not only could participate in carrying out the plan within their borders, but they could also be a force to execute the New Silk Road vision in other countries. With Iran’s combined effort, we will try to eliminate a number of burdensome international regulations that might disturb our financial relations”. Minister Ali Tayebnia responded in the following way: “Iran’s position in Xi Jinping’s innovative plan to revive the New Silk Road is spectacular and ideal; therefore we intend to play an effective role in its implementation”
In September 2017, on the sidelines of the United Nations General Assembly, President Rouhani said: “About the Silk Road and the new plans that China has in this regard, we have talked about this issue several times with president Xi Jinping and Iran is willing to have its share and cooperation in this plan. The new Silk Road can be beneficial for the economic interests of all countries that were a part of this road. We welcome this plan and we have discussed with Chinese authorities in this regard and we have plans about it”. Such a declaration dispelled initial doubts and confirmed Iran’s commitment to the Belt and Road Initiative.
In terms of economic ties, trade turnover between China and Iran in 1978 was twenty times greater than in 1971. In 2016, both sides traded commodities worth over 50 billion USD. Furthermore, the current Iranian government intends to increase trade with China to 600 billion USD by 2026. President Rouhani would like to boost trade with the Chinese by about 1,000%, however, such a high increase in the bilateral trade turnover looks very unrealistic, at least for the time being and there are many obstacles that should be removed in order to achieve such an ambitious economic goal.
John W. Garver claims “Iran, along with Pakistan, plays an increasingly important role in providing western China access to the oceanic highway of the global economy. Economic and strategic factors converge here”.
As far as economic sanctions and their implications are concerned, John W. Garver proves that, although U.S.-China relations are the core element of China’s foreign policy, “the evidence does not suggest that China’s support for the Islamic Republic of Iran between 2003 and 2011 has seriously injured Sino-American cooperation”. Furthermore, international sanctions imposed on Iran have helped China to strengthen its position in this Middle Eastern state. For instance, in 2011 Iran’s crude oil export to China constituted 21%, making the People’s Republic of China its second most important trade partner. In 2014, after the EU had imposed its sanctions, China became the biggest importer of Iranian crude oil and its share in Iran’s export rose to 45%.
In terms of connectivity, the first noticeable event in the framework of the BRI took place in February 2016, when the first direct train from Zhejiang to Tehran, taking around 14 days, 30 days less than the maritime voyage. Important obstacles are there for Iran such as border controls, some technical issues, diversification of its export base and exploring the possibilities of increased trade with Central Asian nations.
Similarly, the development of one of Iran’s main harbours, Chabahar is part of the BRI development project. Chabahar serves as the gateway to the markets and the energy routes of Central Asia and the Middle East. One of its main functions is to connect the Indian Ocean with transportation hubs in Afghanistan, as well as CAR’s. India is one of the main supporters of the development of Chabahar because Indian enterprises have access to Afghanistan and CAR’s thus bypassing its archrival Pakistan. If there were no port investments in Iran, India would not have any access to Central Asia due to the ongoing border disputes and tensions with Pakistan.

At the same time, the Chinese government invests more and more in its flagship project in Pakistan, the harbour in Gwadar, which is located nearby the Iran-Pakistan border.

Undoubtedly, the BRI creates new opportunities for China and Iran, and the success of BRI depends to a larger extent on Iranian participation and support, especially as far as geopolitical and logistical issues are concerned. For this reason, the Chinese will do a lot in order to please their Iranian counterparts and Iranians will do a lot to attract Chinese investors and benefit from the project.

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About Zeeshan Shoukat 10 Articles
The author is a Geopolitical and Strategic Analyst. He writes on Indo-Pak Ties, Geopolitics of Indian Ocean, Evolving Dynamics in the Middle East, and Global Power Politics. He tweets at @_IamZeeshan