China Says Will Maintain Normal Relations With Iran

China will maintain normal relations with Iran, the Commerce Ministry in Beijing said on Thursday.

Gao Feng, the ministry's spokesman, made the statement when asked at a regular news briefing if Chinese firms would withdraw from the Iranian market, Reuters reported.

US President Donald Trump pulled the United States out of an international nuclear deal with Iran in May and said he would reimpose harsh sanctions on Tehran.

“China and Iran are enjoying good relations in the political, economic, industrial, investment and energy sectors, and bilateral ties are expected to step forward after the meeting between Chinese President Xi Jinping and Iranian President Hassan Rouhani,” Iran’s Ambassador to China Ali Asghar Khaji told Global Times in a recent interview.

Rouhani was in China for a working visit as well as the annual Shanghai Cooperation Organization summit earlier this month in the Chinese coastal city of Qingdao in Shandong Province. Iran is an observer member of SCO.

Khaji noted that China was the first destination of Iran’s Foreign Minister Mohammad Javad Zarif after the US pullout, showing that Iran expects China to play a “major and constructive” role in saving JCPOA.

“The nuclear deal was hard-earned and helped safeguard the international system of non-proliferation and maintain peace and stability in the Middle East,” Chinese State Councilor and Foreign Minister Wang Yi said during talks with Zarif in Beijing in May.

“China has played a very positive and fair role in the negotiations. After the deal was reached, China has been truthful in implementing the landmark deal.”

China remained Iran’s top trading partner in 2017. Iran exported 34.89 million tons of commodities worth $9.06 billion to China last year, up 8.31% year-on-year.

“Iran’s trade and economic relations with China are transparent, and there is no reason for these relations to cease,” he said.

Khaji said Iran is interested in further enhancing bilateral relations with China, stressing that there is no international factor to restrict or stop the two sides from developing their relations.

> Rouhani's Visit to China

During President Rouhani's visit to China, the two countries signed several agreements to boost trade and financial ties, including an agreement to use their respective currencies.

Speaking to IRNA on Sunday, Economy Minister Masoud Karbasian, who accompanied Rouhani during the visit, said one of the agreements had been reached between his ministry and China Infrastructure Development Organization to use the two countries' financial resources for investment and bilateral trade.

According to Karbasian, as per the agreement, the two country's trade ties have been devised within the framework of the Belt and Road initiative, which specifies the share of each country in the plan.

The initiative promotes a vision of expanding links among Asia, Africa and Europe to revive the ancient Silk Road underpinned by billions of dollars in infrastructure investment.

China's Finance Minister Xiao Jie has in the past underscored Iran's strategic role in China's New Silk Road plan, noting that Iran can be a party for fulfilling this vision.

Prior to Rouhani's visit, Governor of the Central Bank of Iran Valiollah Seif also said the prospect of Iran and China using local currencies in bilateral trade will eliminate difficulties arising from the US decision to quit the nuclear deal Iran signed with world powers in 2015.

Iran intends to strike monetary agreements with several nations as part of its efforts to ditch the US dollar in its dealings.

The country currently has a total of 10 "memoranda of understanding and protocols" pertaining to monetary agreements with other countries, according to Samad Karimi, the Central Bank of Iran's head of Exports Department.

In April, Tehran announced it will publish all its official financial reports in euro instead of the US dollar to encourage a switch to euros among state economic agencies.

China’s adeptness at doing business with Iran through state-owned companies not exposed to the American financial systems is expected by some to make Beijing the biggest beneficiary of Trump’s move to withdraw from JCPOA.

Karbasian added that another document on the expansion of bilateral scientific and technical cooperation was signed in the presence of the two countries' leaders.

Two other bilateral agreements, he said, pertained to stock exchange cooperation and fighting illegal drugs and organized crime.

"In order to increase trade volume between the two countries, talks were held on enhancing banking, oil and petrochemical sectors," Karbasian said.

At the annual summit of SCO, China’s president warned against unilateralism and trade protectionism as he, Russian President Vladimir Putin and Central Asian leaders used the regional meeting to criticize US policy.

Xi and Putin and others pledged their support for the Joint Comprehensive Plan of Action—the formal name of the nuclear deal Iran signed with world powers in 2015.

“China is willing to work with Russia and other countries to preserve JCPOA,” Xi said.

> Filling the Void

“The dynamics of the US withdrawing from the [nuclear] deal and leaving European sides scrambling to protect their business interests has led to Iran reaching out to China and encouraging it to commit to investing,” said Ahmad Majidyar, an Iran analyst with the Washington-based Middle East Institute, the Washington Times wrote in an article.

“China is looking to fill the void left by departing companies. But they face a dilemma: How will they maneuver around what new sanctions or conditions emerge? That remains to be seen.”

Carleton Greene, a former high-level sanctions official in the US Treasury Department, said it is entirely plausible that China could benefit from a reduction in competition from European companies fleeing business opportunities in Iran because of the threat of reimposed sanctions.