Why Iran nuclear deal fallout could scuttle China’s Middle East ambitions 

If there is a clear loser in the demise of the Iran nuclear deal, it is likely China. On Tuesday, US President Donald Trump virtually killed the Joint Comprehensive Plan of Action, which six world powers – the United States, Russia, China, France, Britain and Germany – had agreed on in 2015 to curb the military dimension of Iran’s nuclear programme in return for relief from economic sanctions. 

China played an important role in the negotiations leading to the deal, and together with Russia and the three European signatories has tried to save it in the past months. Russia, France, Britain and Germany have already said that they are still committed to the deal and will work to forge a new agreement. The Chinese leadership is likely to join forces with them. International stability is key to China’s long-term strategic plans.

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As a trade-oriented power, China has an interest in preventing further destabilisation of the Middle East, where it has strong economic ties with Iran, but also with Israel and Saudi Arabia, two regional arch-rivals of Tehran. China was Iran’s top trading partner in 2017, as well as Saudi Arabia’s second-largest and Israel’s third-largest. 

The signing of the Joint Comprehensive Plan of Action did not eliminate confrontation in the region, but contributed to reducing the danger of a direct conflict between Iran and Israel, and between Iran and Saudi Arabia. 

Now that the nuclear pact seems doomed, the risk of an all-out war involving these three actors has increased, also considering that Israel recently escalated attacks on Iranian positions in Syria, and reports say Saudi Arabia is stepping up cooperation with Washington to fight pro-Iranian Houthi rebels in Yemen.  

In this new scenario, China’s plans to make the Middle East a key section of its Belt and Road Initiative, which is designed to increase connectivity across Eurasia, could be derailed. 

Chinese President Xi Jinping launched the infrastructure scheme in September 2013 and Beijing aims to gain greater access to markets in West Asia through its new “silk routes”. From 2014 to 2017, China invested about US$64 billion in the region, of which some US$10 billion were channelled into transport projects, according to the China Global Investment Tracker. 

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China would need a stable geopolitical environment to preserve its considerable investments in the Middle East, which is also the country’s main source of oil and gas. For instance, last year, the Export-Import Bank of China signed a US$1.5 billion contract to fund the electrification of a high-speed railway between Tehran and the eastern city of Mashhad.  

As for investments in Israel, a Chinese firm will be running the port of Haifa for 25 years starting from 2021, while another one was chosen to construct the port of Ashdod in 2014. In addition, some Chinese funds will help build a light rail line in the metropolitan area of Tel Aviv. 

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The Belt and Road Initiative is also expected to be linked to Riyadh’s “Saudi Vision 2030" plan, which is aimed at promoting Saudi Arabia’s position as an international trade hub.  

Some say China could actually benefit from Trump’s withdrawal from the Iran nuclear deal, as the US president’s move could foster increased cooperation between Beijing and Tehran in both the military and economic spheres. 

The Joint Comprehensive Plan of Action restricts the export of advanced offensive weapons to Iran until 2020. Tehran could have more access to Chinese-made weaponry with the termination of the agreement. In the past, China transferred missile technology to the Islamic republic. The Iranian government could now focus on the acquisition of naval assets to bolster its sea-denial capabilities against the US navy in the Persian Gulf and the Strait of Hormuz. 

Mojtaba Zonnour, chairman of the Iranian parliament’s committee on nuclear policies, said last month that China and Russia were willing to build small nuclear power plants in his country. Iran’s semi-official Fars News agency emphasised that these systems could be used to develop nuclear submarines. Building vessels of this type is no easy task, and it remains to be seen whether Tehran will be able to carry out such an expensive military project. 

But the simple fact that China may help the Iranians deploy submarines powered with highly enriched, weapons-grade uranium cannot but anger the US and its key allies in the area – Israel and Saudi Arabia. 

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On the economic front, China, which was until recently able to skirt the US sanctions regime against Iran, could increase its exports to the Iranian market, since European traders are likely to take care not to run into Washington’s secondary penalties. 

But Trump’s recent bashing of big Chinese companies doing business with Iranian entities – for example, smartphone maker Huawei Technologies and telecom equipment producer ZTE – signals that the US president is going to make Beijing pay a high price for its engagement with Iran.  

Gone are the days when China could comfortably weave its diplomatic web across the Middle East under the Joint Comprehensive Plan of Action umbrella, building upon economic strength to complete its transition from a great regional power to a global one.

Emanuele Scimia is an independent journalist and foreign affairs analyst