Middle East Institute Focuses on Iran-China Strategic Agreement

The 25-year strategic agreement between Iran and China that made headlines this past month is far from new. 
Preliminary plans were first announced in 2016 during a state visit by Chinese President Xi Jinping to Tehran, at a time when sanctions on Iran were being lifted as part of the 2015 nuclear deal. 
Chinese and Iranian officials started working out the details of the deal as part of a slow process of consultation and negotiations, reads an article published by the Middle East Institute. Excerpts follow:
This process was doubtless complicated by the sudden uncertainty created by Washington’s abandonment of the 2015 nuclear deal and decision to reimpose sanctions on Iran from 2018. 
However, negotiations between Iran and China accelerated again as US-China tensions increased and Beijing began looking for ways to push back on what it calls American “bullying”, such as the extraterritorial sanctions imposed on Iran. 
The timing of the latest announcement about the 25-year agreement is, therefore, less about developments in relations between Beijing and Tehran and more about the fast-deteriorating relations between Beijing and Washington. 
China is looking to identify areas where it can cultivate leverage and Iran is a prime opportunity.
Iran’s interest in China’s Belt and Road Initiative, a global infrastructure development plan, in particular is driven by a few primary calculations:
- It provides potentially considerable economic opportunities for Iran;
- It provides Iran with political insurance against international isolation in the future;
- It has the potential to give Iran an advantage over some of its most prickly rivals, such as Saudi Arabia (which today is a far big oil supplier to China than Iran); and
- While China-Iran relations in the energy sector remain relatively strong, military ties have great potential for growth.

Trends and Drivers 

Beijing’s plan to implement BRI, launched in 2013, was warmly welcomed by Tehran from the outset. The project, which would link China with world markets through an extensive and ambitious set of land and maritime trade routes across Eurasia and adjacent seas, puts Iran in the center of China’s global plans. 
While several dozen states are set to take part in BRI (somewhere between 50 and 65 by some accounts), Iran is one of the key components of the project, which is estimated to cost about $1 trillion in total over a 10-15-year period.
The basic geography of Iran makes it the only viable bridge from world seas to the landlocked Central Asian states (a market of about 65 million people) and the three states of the South Caucasus (Armenia, Azerbaijan and Georgia, although the latter has access to the Black Sea). 
China’s commitment to becoming the predominant economic and political power in the heart of Eurasia cannot be underestimated. To secure its grip over Central Asia, an Iran that is closely integrated into BRI provides an important form of insurance for the Chinese against alternative options for the Central Asians that might emerge in the future. 
At present, the Central Asians have three outlets to world markets: east via China, south via Iran and west via Russia. The successful implementation of BRI would give China de facto control over two of the three outlets.
Kazakhstan is leading the pack among the five Central Asian states in linking up with Iran, with an eye to connecting to world markets via Iranian ports. In December 2014, a 925-km rail line running from Kazakhstan to Turkmenistan and on to Iran was inaugurated. 
In Kazakhstan’s push for a multi-vector foreign policy, Iran has always stood out as an important priority. This was a big factor in its role as a nuclear mediator between Iran and the West during two rounds of talks held in Almaty in early 2013. 
Meanwhile, in February 2016, the first rail cargo from China arrived in Iran via the Kazakhstan-Turkmenistan-Iran rail link.
However, BRI also does create uncertainties for the Iranians. One of Iran’s biggest infrastructure projects in the last decade has been the development of Chabahar Port on Iran’s Indian Ocean shores. 
This project has been much delayed but remains critical for Iran as a way of providing a more commercially viable outlet to the Central Asian states, and thereby turning Iran into an important transit linchpin. 
To say that the Iranians want to turn the port into a rival of Dubai is not an understatement, even if such a scenario is unlikely in the near term. China has in the meantime invested heavily in a nearby and potentially rival project in Pakistan, the port of Gwadar. 
To complicate things further, it is China’s rival, India, which is among foreign states most invested as a partner of Iran in Chabahar’s development. Japan too has been mentioned by Iranian sources as a potential investor in the port project.  
Japan is said to be interested in the port’s development for the same reasons as China: to strengthen ties to the 82-million-strong Iranian market while also turning Iranian territory into a conduit to the markets of Central Asia. 
Nonetheless, for now, this potential conflict of interest does not pose an insurmountable obstacle to realizing the Iran segment of Beijing’s BRI plans.

Insurance Policy

China and Iran will inevitably continue to develop closer ties, mainly in the economic field. While Iran and China have similar views on the international order (anti-US hegemony, emphasis on sovereignty), China will likely be reluctant to get too entangled with Iran given the risky business environment (and threat of sanctions). 
Finally, there is also still a broad agreement among observers that the US serves as a significant constraint on deepening Iran-China relations, given China’s desire for profitable trade with the US and ongoing Chinese adherence to US sanctions on Iran. 
Nonetheless, at a minimum, even the publicity around this agreement is seen by Tehran as undermining Washington’s argument that Iran is isolated because of the “maximum pressure” campaign. 
At best, the 25-year strategic deal between Tehran and Beijing can be Iran’s “insurance policy” if US sanctions continue and the US-China fight escalates. In short, this deal is not just a piece of propaganda by Tehran.