Hit by US sanctions, Iran desperately needs partners to sell its oil, while China wants to increase its political and economic clout across the Middle East.

China and Iran, the two old eastern powers punished by the US sanctions, have signed a $400 billion deal, tightening their cooperation to fight back against Washington. 

According to the deal, China will invest across Iran for the next 25 years in return for Iranian oil. In addition to its investment clauses, the agreement also calls for security cooperation and an intelligence partnership. 

The deal comes at a delicate time: the US has imposed fresh sanctions on Beijing and the new Biden administration refuses to rescue the internationally-approved nuclear deal with Tehran, leaving harsh sanctions in place. 

“It is speculative, but the timing suggests that China was ready to fill the gap created by Iran’s undoubted disappointment with the unwillingness of the Biden presidency to undo the damage done by imposing sanctions and withdrawing the US from the JCPOA Nuclear Program Agreement of 2015 by the Trump presidency,” observes Richard Falk, a prominent expert on international relations and professor of international law at Princeton University.  

“From Iran’s side it was a matter of meeting economic needs and signaling an unwillingness to submit to the American insistence that Iran curtail its regional objectives in the Middle East or accept a revival of the Nuclear Program Agreement in a way that put new burdens on Iran’s enrichment processes,” Falk tells TRT World.  

China’s pivot to the Middle East

Some experts have already commented that the American sanctions might push countries like Iran “into China’s outstretched arms”, and discourage Tehran from reaching a political agreement with Washington. After the sanctions, China began importing large amounts of oil from Iran. 

As a result, Iran’s communication with Washington would mainly depend on the progress of Tehran's cooperation with Beijing. “This is likely to annoy US policymakers, both a slap at them and a pat on the back for China,” Falks says. 

“It is likely that such an agreement would have been made in any event, but doing it at this stage was a pushback against American aggressiveness toward both China and Iran. China probably also wanted to signal its geopolitical firmness given the way Biden has made a point of highlighting the Chinese challenge to Western values and interests,” the professor adds.  

The agreement was signed in Tehran during a diplomatic visit by the Chinese Foreign Minister Wang Yi, who is currently touring the Middle East from Turkey to Iran and Gulf countries in an extensive program, aiming to reach regional powers. 

China's State Councilor and Foreign Minister Wang Yi and UAE's Foreign Minister Abdullah Bin Zayed Al Nahyan are seen during their meeting in Abu Dhabi, UAE, March 28, 2021.
China's State Councilor and Foreign Minister Wang Yi and UAE's Foreign Minister Abdullah Bin Zayed Al Nahyan are seen during their meeting in Abu Dhabi, UAE, March 28, 2021. (Credit: WAM/Handout via / Reuters)

“China is a friend for hard times. The history of cooperation between the two ancient cultures of Iran and China dates back centuries. Signing the cooperation agreement will further strengthen the ties of the two nations,” said Javad Zarif, Iranian foreign minister, following the signing of the deal. 

Zarif’s Chinese counterpart also applauded the deal. 

“China firmly supports Iran in safeguarding its state sovereignty and national dignity,” pledged Wang during his meeting with Iranian President Hassan Rouhani, according to the Chinese foreign ministry

For future relations between China and the Middle East, Wang set five principles, asking the countries “to respect each other, uphold equity and justice, achieve nuclear non-proliferation, jointly foster collective security, and accelerate development cooperation.” 

While Beijing appears to be avoiding setting a particular political agenda in a deliberate fashion in the Middle East, the China-Iran agreement might still mark a new era for Beijing’s “readiness to be more engaged” in the region, according to Falk. 

Fatima Karimkhan, a Tehran-based journalist and Iranian political analyst, does not see the agreement as “a game-changer”. But she still views it “one of the first steps for China in its way to find a more stable path in the Middle East.” 

While China's international politics has been much more aggressive in the Middle East in recent years, it may change should the US choose to stay aside, according to Karimkhan. “I believe that China is looking forward to stepping on the train and very much optimistic to be replaced with the US in the region,” Karimkhan tells TRT World

Signalling their future political intentions in the region, Chinese officials have recently  indicated that the country could host direct talks between Israel and the Palestinians. 

Iranian politics and China

The agreement, which was prepared nearly a year ago, was also put in motion ten weeks before the Iranian presidential elections, in which resurgent hardliners will take on diminishing moderates once more. The deal might play a role in shaping elections, says Karimkhan. 

People shop at the Tajrish Bazaar, ahead of Nowruz, the Iranian New Year, amid the coronavirus disease (COVID-19) pandemic, in Tehran, Iran March 17, 2021.
People shop at the Tajrish Bazaar, ahead of Nowruz, the Iranian New Year, amid the coronavirus disease (COVID-19) pandemic, in Tehran, Iran March 17, 2021. (Majid Asgaripour/WANA (West Asia News Agency) / Reuters)

“This much focus on this agreement is much likely to be part of a public relation plan and a media war,” Karimkhan says. Iranians do not have a very good business history with China, she adds. “They have left Iran's hands empty several times despite some agreements.” 

According to Karimkhan, for Iranian policymakers, there is no significant difference between China, the EU and other countries. But the problem is that while Western countries say “they are willing to work in Iran”, they cannot fulfill their promises for various reasons, ranging from fierce anti-Tehran political lobbying in Washington, to Iran’s domestic laws. 

According to Iranian trade laws, any foreigner who wants to do business in the country needs to build a company through a partnership with an Iranian national, where the native investor should have the majority share. 

“Look at Renault or Samsung and others, they have to first build a company in Iran and then, they can start the business. Things are a bit different when it comes to infrastructure investments, but still Iran is not an easy country for outsiders to work with,” Karimkhan observes. 

“Anyway, in Iran, the public opinion is much more likely to be a fun of working with Western counterparts and this is what the government and international agreements can't change easily,” she adds. 

Chinese economic expansion

Iran’s energy resources, along with its promising infrastructure and logistics sectors, provide adequate reasons for China to invest in the Shia-majority country, according to Esref Yalinkilicli, a Moscow-based political analyst on Eurasia.

 “You can see China wherever oil is,” he tells TRT World.  “China uses the US sanctions in its favour, buying discounted oil from Tehran, one of the world’s primary oil producers. Tehran’s metro was also built by Chinese companies". 

In order to keep the American power in check, China as a rising power wants to develop “tactical alliances" with both Iran and Russia, a former superpower, Yalinkilicli views. 

But experts also point out both Tehran and Moscow have reservations towards China’s economic expansion in the Middle East and Central Asia. While Iran wields a strong influence in the Middle East, Russia considers Central Asia its backyard. 

“Both Russia and Iran are not happy about China’s economic expansion across the East,” Yalinkilicli says, adding they are aware that Beijing uses economics as a tool for its expansionist policy.

China is not willing to sacrifice its relationship with the Western bloc by signing a deal with Iran, says Karimkhan, the Iranian analyst. There are no longer serious “ideological differences between China and the West right now,” and all of them are looking for market opportunities.

“Chinese might not risk the Western market to build a market in Iran. Also, when it comes to sanctions, China is doing exactly like Western countries, with a small difference about its oil supplements,” she adds. 

“In a potential conflict between China and the West, Iran will be a strategic friend for China. But, in the scenario of a potential conflict between Iran and the West, or even Iran and other countries in the region, China probably will sit aside,” she concludes. 

Source: TRT World