Iran-China Marriage.. Playing with Dirt or Playing with Fire?

The Deal’s History

The deal was discussed first during Chinese President Xi Jinping’s visit to Tehran in 2016, when he met Iran’s Supreme Leader Ali Khamenei, but the planned agreement came under intense scrutiny last summer, when a supposed draft of the deal leaked. The documents claimed that China was willing to invest $400 million in Iran over 25 years of the agreement, in exchange for unprecedented access to Iranian ports and islands. In turn, this raised fears of a loss of sovereignty among The Iranians, as Chinese investment is a sensitive issue.

This deal is the first time Iran has signed such a lengthy agreement with a major global power. Where the first deal with one of those countries dates back to 2001, when Iran and Russia signed a 10-year cooperation agreement, especially in the nuclear field. The deal was extended another 10 years through two five-year extensions.

What is in the Strategic Cooperation Agreement between China and Iran?

Despite the major media hype surrounding the 25-year deal, details remained rare. There is no logical explanation for this ambiguity!!

The text of the convention has not yet appeared and may not be published, so these analyses should be taken with caution.

However, the draft agreement was leaked last summer, and the text is unlikely to have changed significantly in the past six months. Furthermore, multiple sources reported that there had been little change in the leaked Convention. What can be said about the deal based on this leaked draft?

Wang was also in Iran as part of a broader six-nation tour of the Middle East, which also included Saudi Arabia, Turkey, UAE, Bahrain and Oman, with another explanation that the visit was not a “special visit” to sign this full comprehensive strategic agreement that carries with it everything that has been filmed and announced.”

“The plan focuses on leveraging the potential for economic and cultural cooperation and charting a path for long-term cooperation”

“Neither includes any quantitative, specific contracts and goals nor targets any third party, and will provide a general framework for China-Iran cooperation going forward.” Zhao Lijian, Chinese Foreign Ministry spokesperson says.

Most importantly, the reported $ 400 million did not actually appear in official announcements of the signed deal, despite its appearing in several foreign media reports. In fact, when Zhao was pressed over the total amount of Chinese investment, he declined to answer.

The agreement as announced, which was dubbed the Comprehensive Strategic Partnership, covers a variety of economic activities from oil and mining to boosting industrial activity in Iran, as well as cooperation in the field of transportation and agriculture, according to the report. The agreement also supports tourism and cultural exchanges. It comes on the 50th anniversary of the establishment of diplomatic relations between China and Iran.

In other words, there may be less than meets the eye in the agreement, at least in its current form. Researchers including Bill Figueroa, a researcher specializing in Sino-Iranian relations, argued in a post on Twitter that the agreement “was not a big deal.” Rather, it is an “ambitious document” that “does not provide any implementation methods, measurable goals, or specific programs.” He noted that on the defense side in particular, the specific areas for cooperation “are all things that already exist,” and they fall within the criterion of China’s participation with other regional powers.

Bill Figueroa tells a similar story about China’s investment in Iran. According to China Global Investment Tracker, China’s investments in Iran from 2010 to 2020 amounted to $ 18.2 billion. During the same period, China invested $ 30.6 billion in Saudi Arabia and $ 29.5 billion in the UAE.

While Beijing and Tehran are seeing political benefits in promoting their relationship, the actual results lag behind in comparison to Chinese relations with Iran’s opponents in the Persian Gulf.

“In short, this agreement represents an attempt to restore Sino-Iranian relations in line with the rest of the Middle East countries, instead of expanding beyond the usual for China’s involvement in the region,” Figueroa concluded his speech .

It is said, “The devil is in the details,” but as it appears the details are not yet available, and it seems that these still need to be settled, in the form of contracts and specific plans for cooperation. Despite the hype surrounding the agreement, something still impeded Sino-Iranian relations – whether it was China’s hesitation to bond with Iran’s sanctions-ridden economy, Iranian fears of losing sovereignty, the complex geopolitics of the Middle East or a combination of them.

According to economic reports, Iran and China have generated about $ 20 billion in trade annually in recent years. That’s less than nearly $ 52 billion in 2014, due to lower oil prices and US sanctions imposed in 2018 after US President Donald Trump unilaterally withdrew the United States from the nuclear deal.

Therefore, Iran backed away from the restrictions imposed under the agreement under those sanctions in order to pressure the other signatories – Germany, France, Britain, Russia and China – to offer new economic incentives to offset the US sanctions.

There are no specific commitments, no investment of $ 400 billion

First off, nowhere in the text of this or any other official document or pronouncement is any numerical figure mentioned. There are also no provisions whatsoever for the sale of islands, military bases, occupation, or anything that would sustain the other alarmist claims. This has been thoroughly debunked by multiple scholars, and a quick glance at the text will confirm their claims. While the draft itself appears to be genuine, the claims of $400 billion of Chinese investment and massive military concessions can be traced to a poorly sourced Petroleum Economy article from 2019, which has since been taken offline.

Chinese Foreign Ministry spokesperson Zhao Lijian said the day after that the China-Iran Strategic Comprehensive Agreement “neither includes any quantitative, specific contracts and goals nor targets any third party, and will provide a general framework for China-Iran cooperation going forward.”

The same day, Reza Zabib, head of East Asia at Iran Foreign Ministry, called the agreement a “non-binding document.” In response to why the text has not been published, he claimed that “there is a legal requirement to publish agreements; however, the publication of non-binding documents is not common.”

Both sides have now admitted that the plan contains no “quantitative, specific contracts” and is a “non-binding document.” This confirms what was signed was little changed from the leaked agreement last summer. The agreement can best be described as an aspirational document. It is a signal that Iran may grow closer to China, but not a guarantee. It provides no methods for enforcement, measurable goals, or specific programs. It calls for vague “cooperation” through “enhancement of contacts” in several areas. China also pledged to increase investment in Iran tenfold in 2016, with little progress to show for it five years later. In fact, Chinese investment has decreased substantially since then.

It is worth noting that both pledges came in the wake of a new U.S. president with a new foreign policy. This does not mean that China-Iran ties are driven by U.S. policy, but the tendency to trumpet them, and exaggerate them, is partly driven by the desire to project strength internationally.

Mutually Beneficial Agreement; Economic, Political, and Trade Ties

Whether the agreement would be “mutually beneficial” depends on what perspective one takes. For the Iranian state, it provides several benefits: a stable partnership with China means a stable market for oil at a time when U.S. sanctions have seriously hurt its revenues. It also projects an image of strength and represents an attempt to break out of the diplomatic isolation imposed by the U.S.

For China, it provides similar benefits – a stake in a major source of oil (although Iran provides a tiny fraction of China’s overall oil imports), a large foreign market for Chinese goods (although one that requires a lot of investment), and both real and symbolic progress toward the realization of the Belt and Road Initiative and the expansion of China’s global reach.

From the perspective of the Iranian people, things look very different. Questions of “selling Iran” aside, closer relations with China remain unpopular with many segments of the Iranian population, who often object to the flood of cheap, low-quality Chinese goods, which wreak havoc on the local economy and cause a “race to the bottom.” Some do not consider China a stable partner, pointing to the fact that it has pulled out of many deals with Iran in the past. Rather than asking if the agreement is mutually beneficial to China and Iran, it would be better to consider a different version of that question: “Who in Iran and China does it benefit?”

Reports in the Iranian media have reflected this hesitation. The official Fars News agency described the agreement as “somewhat ambiguous, and on the other hand, in some cases, Iran has had bitter experiences in dealing with other countries. It has pros and cons.”

The report discusses general plans for cooperation between banks and infrastructure projects related to the “New Silk Road” and the Belt and Road Initiative, but acknowledges the agreement is a “roadmap.” Discussing technology transfer, it urges that “if Iran wants to make progress… it should not wait for the other side” and needs to develop “a long-term plan” before entering into specific agreements. Chinese investors are “encouraged” to invest in Iran’s various free economic zones, such as Maku along the Turkish border, Qeshm island in the Strait of Hormuz, and the strategic Arvand Free Zone near that Shatt al-Arab.

However, the paper admits that while these areas were created to attract foreign investors, “the infrastructure that exists in our free zones, unfortunately, has not been able to actively attract even domestic investment.” In other words, the Chinese side has yet to commit to specifics and historically has been reluctant to do so.

While the deal has a significant amount of support among Iran’s business community and at multiple levels of government, other factors complicate further investment. Chinese companies are not likely to openly invest huge amounts while vulnerable to sanctions. But there are other barriers as well: Due to the bad reputation of Chinese goods, many Iranians are reluctant to buy them, and both sides grumble about the difficulty of dealing with the bureaucracy of the other.

Although often directed to focus on specific areas or countries in line with diplomatic initiatives, a business must remain profitable, and both sides must be willing to do business on the micro level as well as the macro level.

Defense and Strategic Concerns

In terms of defense, the items mentioned in the draft agreement – joint military exercises, sharing of intelligence related to terrorism, cooperation on international crimes – are all things that already exist, and so represent no great shift in policy even if they become more formalized. They are also already in place with most neighboring Gulf States.

 In fact, China has similar Strategic Cooperative Agreements with five other countries in the Middle East, including Saudi Arabia and the UAE, Iran’s regional rivals. It also has such agreements with Russia, India, Egypt, Pakistan, Ireland, Qatar, and others.

In short, this agreement represents an attempt to bring China-Iran relations back in line with the rest of the Middle East and its international outreach efforts, rather than expansion of beyond the norm for China’s engagement with the region and the world. Any increase in relations going forward is likely to be in line with and balanced against relations with other Gulf States.

That said, the deal does offer some strategic advantages to Iran. While China has no real capacity to oppose the sanctions or even things like the U.S assassination of Qassem Soleimani, the prospect of increased Sino-Iranian relations does provide the Iranian state with some breathing room and room to posture. It may even positively impact the prospects of resuming the Joint Comprehensive Plan of Action (JCPOA), as the Iran nuclear deal with the U.S. is known.

During a Q&A session on the social media app Clubhouse, Iranian Foreign Minister Javad Zarif said, “We were able to jump start the China strategic deal thanks to the signing of JCPOA. Before that the Chinese were not replying to our overtures.” This is consistent with statements from Beijing at the time of the signing of the JCPOA, the 2016 commitment, and today. Improved Iran-U.S. relations are a precondition to increased Sino-Iranian economic involvement.

 The Biden administration has expressed “concern” over the partnership, but it has also agreed to attend a summit this week in Vienna involving China, Iran, Russia, and the EU.

Conclusion

Since the agreement was officially signed, a chorus of experts on China-Iran relations have weighed in on the significance of this agreement. Jonathan Fulton, a senior fellow at Atlantic Council and assistant professor of political science at Zayed University in Abu Dhabi, called it “a list of things [Iran and China] hope to do, under perfect conditions.” Jacopo Scita, a doctoral fellow at Durham University, called the agreement a “mirage” and a “details-shy plan” that should not cause the “panic” it has in Western commentary. Lucille Greer and Esfandyar Batmanghelidj, two researchers who have analyzed the leaked draft extensively, have argued in the Washington Post that the agreement is “not as alarming as it sounds.” Fan Hongda, a Chinese academic at the Middle East Studies Institute at Shanghai International University, called the agreement “just a roadmap” that depends on “the strength and depth” of future Sino-Iranian cooperation.

Caution must be taken not to minimize the deal entirely. It is not “fake news” that China-Iran relations are likely to improve. It carries great symbolic significance and allows the Iranian state some room to posture and negotiate. However, alarmists who push for a more aggressive stance toward both China and Iran based on this deal are massively exaggerating its terms.

Is there an expansion of Sino-Iranian relations in the works? Yes, and it is significant. It will see increased investment and linkages between the countries. But there are no specifics, no indication of $400 billion worth of investment forthcoming, and no indication of unprecedented military cooperation or Chinese troops being stationed in Iran. The fact is, we have no reason to believe that the deal is a massive shift in China’s international policy, and every reason to believe it will be balanced against China’s relations with the U.S. and other states in the region, including Iranian rival Saudi Arabia.

While China remains Iran’s largest oil importer, Iran is not China’s largest oil supplier, with Iran ranked ninth according to final statistics for 2019, Saudi Arabia in 2020 remains China’s No. 1 exporter, and Chinese companies have not increased investment, imports or exports at the levels they pledged in 2016, and are unlikely to do so in 2021 either. The deal is unlikely to fundamentally threaten the balance of power in the Middle East. China tends to choose stable relations with geostrategic advantages over volatile relations that are likely to provoke conflict. For all its propaganda, China, like Iran, is more interested in its direct geopolitical objectives than in breaking the isolation of the Iranian regime.

A Question Mark!

Why has the U.S. not imposed, to this day, sanctions on the Iranian port of Chabahar? Although this port is currently the most important for Iran in terms of import and export operations. This port in particular is no longer the most important Chinese destination in the “Silk Road” Belt and Road project, but rather the main and only one for completing this project.

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