What to Make of the Iran-China Deal

Iran

Geopolitics

Commentary

Vahid Yücesoy

It was announced on March 27 2021 that China and Iran had signed a 25-year strategic deal, including bilateral cooperation in defense, deepened commercial ties, and increased oil sales. Although the full details of the deal have yet to come to light, it is clear that it is a massive watershed in Chinese-Iranian relations. Moreover, despite some assertions that the deal was caused by the Trump administration’s sanctions policy, it should be noted that the groundwork was laid in 2016, when the Obama-era JCPOA remained in effect.

Chinese-Iranian cooperation was on full display in January 2016, when Chinese President Xi Jinping became one of the first world leaders to visit Iran in the post-JCPOA era. The two leaders signed 17 agreements in various fields, notably in energy cooperation, where they agreed to the goal of boosting trade to $600 billion. This was called a “reciprocal” road map, as part of China’s Belt and Road Initiative (BRI), to expand Beijing’s continental infrastructure across Asia. Despite the fact that Beijing has been Tehran’s largest trade partner since 2009, the current trade volume between both nations stands at a mere $20 billion today – down from $54 billion in 2014, due in large part to plummeting oil prices and the complications created by American sanctions. The deal also envisages the sale of cheap Iranian oil and gas to China. While Tehran is secretive about the extent of discount that Beijing will enjoy, some estimates put it at as high as 32%.

Iran’s Pivot to the East

Iran’s gravitation towards the Chinese sphere of influence has various explanations. It is immediately clear that the shift is part of a global trend; as the global rivalry between the US and China has gained momentum, and as the United States increasingly withdraws its military presence from the Middle East, China has entered the fold with various trade and defense agreements with different countries in the region. For example, China has stepped up its recent investments in a number of Gulf Cooperation Council (GCC) countries – notably Saudi Arabia, where China buys an estimated 20% of the Kingdom’s oil. In 2017, following Washington’s reluctance to arm Saudi Arabia with drones, Riyadh signed a $60 billion deal with China to enable Beijing to produce drones on Saudi soil – a clear message to the kingdom’s erstwhile handlers that America is no longer the only game in town. Significant Chinese infrastructural and defense investments have also been launched in countries like Oman, Kuwait, and Bahrain.

Secondly, the ideologically authoritarian nature of both the Islamic Republic of Iran and the Chinese Communist Party – and their mutual antipathy towards the United States – has provided an adhesive that has reinforced the relations between the two capitals. The Beijing-Tehran partnership is so valuable that, that despite the fact that Iran is ruled by an Islamic theocracy, Iranian officials have quietly refrained from condemning China’s mistreatment of its Uyghur Muslim minority in Xinjiang, a series of persecutions that is now being described as a genocide by many Western states. In fact, let alone condemning China’s treatment of the Uyghurs, several of Iran’s hardliners recently went so far as to claim that China was serving Islam by suppressing them.

Strangely, despite the ambitious goals of the China-Iran deal and the fact that some claim that U.S. maximum pressure facilitated it, the crux of the matter is that China is likely to act as a rational actor in its dealings with Iran. Notably, China will certainly be extremely careful not to jeopardize its relations with the United States, which remains a far more important trading partner (albeit a sometimes confrontational one) than Iran. Finally, if President Biden does not repeal them, the existing Trump era sanctions, as long as in place, will still act as a barrier to Chinese investment in Iran.

Why Don’t More Iranians Like the Iran-China Deal?

The details of the deal have not been made public by Iranian authorities. However, the details that were leaked to the media point to the possibility of more than $400 billion in Chinese investments in Iran. Moreover, the draft version of this 18-page document leaked to the media talked about Beijing investing in Iran’s infrastructural, banking, and telecom sectors, while Iran would be required to guarantee the supply of heavily discounted oil in return. Even before it came out, some uproar in Iranian parliament was also seen, with Mahmoud Ahmadinejad, whose two term presidency and disputed 2009 election provoked a serious rollback of Iranian freedoms, taking the lead to criticize the secrecy of the deal.

Iran saw an outbreak of various demonstrations against the deal in different towns across the country. Its critics, both at these demonstrations and on social media, criticized several supposed aspects of the deal, particularly its secretive nature and the fact that Iran would be providing oil and gas to China at a highly discounted price. Many Iranians are also angry that the leaked document of the draft deal suggested Beijing would have the authority to deploy its own troops to protect their investment – an outrageous demand that many in Iran have compared to a revival of colonialist practices. In fact, a precedent for such a law exists in Iran; the 1828 Treaty of Turkmenchai between Iran and Russia caused Iran to cede a sizable amount of its territory to Russia. The feeling amongst many Iranians critical of the deal is that the country is being sold to China through a deal that will benefit the ruling elite, but whose benefits will not trickle down to them.

Will the Deal Succeed?

Iranian criticism of the Chinese presence in Iran is not new. The presence of Chinese companies engaging in overfishing in the Gulf and the Sea of Oman with the consent of corrupt elements within the Islamic Republic of Iran has worried environmentalists in addition to severely affecting the livelihoods of local fishermen in the region. Many fishermen have been complaining about Chinese firms gaining access to their fishing grounds. Moreover, due to the strength of the bilateral relations, many Iranians have complained that China has been flooding Iran with cheap and defective consumer goods for a long time, destroying local industry in the process.

Finally, Chinese cooperation with the Islamic Republic of Iran has also rattled renowned Iranian human rights activists and dissidents, who see in the Iran-China pact an attempt by the regime to ally with a superpower against increasing international and domestic opposition. At least 230 Iranian activists and many parents of protesters killed during 2019’s Iran protests signed a letter on March 29 condemning the deal.

While this deal remains full of ambiguity, much will depend on the nuclear negotiations taking place now in Vienna for the Iran-China deal to be concretely executed. However, one thing is certain: in contrast to many countries in the Gulf region that have signed trade and investment agreements with China, Iran stands out. It will have the hardest time convincing its population of the deal’s “benefits”. The regime’s secretiveness about the details of the deal along with its widespread unpopularity will hardly help it in this task.

Vahid Yücesoy is PhD candidate in Political Science/International Relations at Université de Montréal, Canada. He is a specialist of Iranian and Turkish politics and political economy.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.