Advertisement
Advertisement
Iranian Foreign Minister Mohammad Javad Zarif (right) welcomes Foreign Minister Wang Yi at the start of their meeting, in Tehran on March 27. Photo: AP
Opinion
Gedaliah Afterman
Gedaliah Afterman

Why overhyped US$400 billion deal changes little for China, Iran or Middle East

  • China’s reliance on Iran for energy has declined, and it is unlikely China will endanger relations with Saudi Arabia and other Arab countries in favour of Iran
  • While Tehran hopes to benefit from cooperation, both sides are aware this is not an agreement among equals, as Iran needs China much more than China needs Iran
Immediately after his meeting with senior US diplomats in Alaska, Foreign Minister Wang Yi embarked on a six-state tour of the Middle East. In Iran, his third stop, he signed the long-discussed 25-year cooperation agreement between China and Iran.

There has been much speculation on what the agreement might mean for the region and for the Joint Comprehensive Plan of Action (JCPOA) negotiations. To understand its significance properly, it is essential to cut through the hype. The reality is that the deal is highly symbolic and will probably not change Sino-Iranian relations dramatically.

China’s interest in Iran is rooted in its quest to secure its energy supply. Iran has the second-largest crude oil reserves in the region, and it holds a key position in China’s Belt and Road Initiative. It can open a China-Pakistan-Iran corridor for Beijing.

Given that Beijing had already signed similar agreements with Saudi Arabia and the UAE, signing one with Tehran does not come as a surprise.

How China’s Middle East charm offensive succeeded despite affecting little change

The deal has been presented as a US$400 billion agreement intended to trade Chinese investment and cooperation for Iranian oil. A draft of the agreement circulated by Tehran in 2020 allows for a more realistic view of it.

The current agreement does not seem significantly different from an earlier agreement signed in 2016, and neither does it state clear goals. It appears to be a long-term aspirational road map rather than a groundbreaking strategic alliance.

The agreement maps out potential areas of cooperation, including the energy, banking, infrastructure and industrial sectors and cooperation in intelligence, counterterrorism and Chinese investment in several Iranian ports.

Potential military cooperation between Iran and China, especially following the China-Russian-Iranian naval exercises in the northern Indian Ocean in 2019, has raised concerns.

Considering its growing two-way cooperation with Saudi Arabia and the Gulf countries, China is likely to have little interest – and questionable capabilities – in becoming a major arms supplier to Iran. The draft agreement makes little mention of it.

In 2016, China and Iran signed the Comprehensive Strategic Partnership with a stated goal to reach a trading volume of US$600 billion within a decade. However, Sino-Iranian trade has been declining steadily in recent years.

The bilateral trade volume is currently at US$20 billion annually, a substantial fall from US$52 billion in 2014, partially because of US sanctions.

Could US sanctions and closer Middle East ties fuel the rise of China’s petroyuan?

In 2019, China imported 17 per cent of its oil from Saudi Arabia, around 10 per cent from Iraq and only about 3 per cent from Iran. Following US President Joe Biden’s election, there has been a spike in interest in purchasing oil from Iran, with China taking advantage of what it expects to be an upcoming easing of sanctions.

Nevertheless, on the whole, China’s reliance on Iran as an energy supplier has declined considerably.

Beijing has proven its ability to calculate the risks and benefits of its diplomatic and trade relationships. Therefore, it is unlikely China will endanger its growing relations with Saudi Arabia and other Arab countries in favour of Iran.

While Sino-Iranian ties are important to Beijing, they are not necessarily a priority. While Tehran hopes to benefit from cooperation, both sides are aware this is not an agreement among equals. Iran needs China much more than China needs Iran. 

Iranian Foreign Minister Javad Zarif has called China a “friend for hard times”, and while Iranian media and officials have viewed the deal not without controversy, Chinese media has been much more subdued. This behaviour indicates that the agreement is not a message directed at the Chinese public.

China has traditionally viewed the Middle East as a US sphere of influence, but Beijing’s engagement in the region in the last decade is challenging this paradigm. Consequently, Sino-Iranian relations need to be seen in the context of the superpower struggle between China and the United States.
Iran is an important strategic player in the region, and it represents a vacuum of US access and an opportunity for China to engage. US “maximum pressure” tactics have made Iran even more dependent on China, to whom it looks to ease its isolation.

05:06

US-Iran tension: Where does China stand?

US-Iran tension: Where does China stand?

Such an agreement, even if only symbolic, might be a valuable card to play in Iran’s upcoming presidential elections, with Iranian President Hassan Rowhani celebrating the deal as an achievement. The prospect of Chinese investment might help Iran end its isolation and benefit its current position in renegotiating the JCPOA.

After concerns were raised, the announcement of the EU-brokered meeting between the P5+1 and Iran shows the China-Iran agreement does not deal a mortal blow to the JCPOA revival efforts. 

China also has an interest in reviving the JCPOA and ending Iran’s isolation – it has called for lifting Iran’s sanctions and for a nuclear-free Middle East.

It is important to remember that just as China appears to be using the current agreement to relieve pressure off Iran and to send a clear signal to the US, it could also, if it so chooses, use the same agreement to incentivise Iran to return to the negotiating table.

Dr Gedaliah Afterman is head of the Asia Policy Programme at the Abba Eban Institute for International Diplomacy at the Interdisciplinary Center Herzliya (Israel)

11