March 27 saw the culmination of a half-decade of negotiations between Beijing and Tehran, with foreign ministers meeting to sign a twenty-five-year $400 billion strategic and economic partnership. The specifics of the agreement are largely in line with China’s ongoing Belt and Road Initiative (BRI), spending billions in infrastructure investment with an eye on long term influence and economic and security hegemony. Major sectors include oil, gas, petrochemical, renewables, nuclear power, and energy infrastructure. The draft agreement also covered the high-tech and military cooperation, as well as port construction to facilitate Iran’s integration in China’s Belt and Road trade routes.
The agreement has seen President Joe Biden propose a democratic counterpart, calling for the west to rival Chinese spending in Central Asia, Africa, and developing nations.
A strategic partnership between China and Iran has serious ramifications for the United States’ strategy of working with OPEC, China containment, and the West’s utilization of sanctions to pressure noncooperative nations.
US – China great power competition is in full swing.
Economic sanctions are a genuinely effective weapon so long as the targeted nation has nowhere else to go. China, though, is willing to do business with nations sanctioned by western democracies. It is unsurprising that oil is a major component of the newly signed partnership. While China is likely to buy at a deep discount, simply having an increased financial flow will help Iran withstand the pressure intended to force it into compliance with international law.
The Iranian regime has found a sugar daddy.
Beyond direct oil exports, there is talk of a joint Iranian-Chinese bank which could facilitate sanction evasion. There’s a clear precedent for this: China buys Venezuelan oil as well, and most of North Korea’s under the table business is done through their larger, far less isolated neighbor.
For China, the benefit is partly straightforward. Another nation outside of the current America-led order is pulled into Beijing’s orbit. Future exports and imports could be made simple by a resurrection of the previously proposed 926-kilometer New Silk Road rail line, conveniently crossing most of Central Asian and with the potential to expand further into Turkey. China is constructing a modern-day Silk Road through Asia and into Europe, this one crafted from iron, steel, concrete, glass, fiber optic cable — and foreign debt. And emerging superpowers are always interested in adding more client states to their menagerie.
A revitalized Iran will raise the blood pressure in Washington and beyond. With the geopolitical backing of China and a lifeline for its economy, we can expect to see a more emboldened Islamic Republic – one with newfound leverage in negotiations. If President Biden thinks he can renegotiate Obama’s deal, that task just became significantly more difficult.
Likewise, Iran’s “bleeding of the Saudis” through Houthi proxies in Yemen (and its support of extremist groups from Lebanon to Syria to Iraq) will now be a much more grave challenge to address.
But there are downsides to China courting yet another volatile satellite. In deepening ties with Tehran, Beijing risks alienating the rest of the Middle East, where it has previously sought partnerships. The past decade has seen the PRC grow its economic, political, and security footprint in the region, becoming the largest external investor for many of these countries.
China is Saudi Arabia’s largest trade partner and Israel’s second largest, both of whom consider Iran their chief geopolitical threat. The potential for increased tensions is high. China is playing a dangerous game that it will need to navigate deftly, lest its newfound strategic relationship become a strategic liability.
It appears that Beijing has weighed the risks – calculating that another energy-rich, anti-American satellite is worth having even if such an arrangement is upsetting to partners and rivals alike.
Assuming that Tehran is willing to play the part.
Last year Iranian social media criticized the forthcoming pact and urged the Ayatollah Khamenei’s regime to scuttle the accords. Many argued that it will amount to a sell-out to a foreign imperial power. The FT reported that signing of the documents during the Persian new year holidays and refusal to disclose any details could be intended to avoid public criticism.
But as the theocratic dictatorship in Tehran ignores people’s will, the realignment is likely to go ahead – with dire consequences to the world’s energy supply and for western interests in the Persian Gulf and the Middle East.
With Assistance from Danny Tomares and James Grant