The China-Iran agreement – Win or Lose?

Iran shows growing weakness. The current regime is under never-ending attack, not only from foreign entities, but first and foremost from its own population. The criticism is well justified: COVID-19 is a disaster, there is not enough fuel to run power stations and large parts of the population have no power, no air-conditioning, no water pumps and thus no water. The power cuts produce short cuts and large fires. It’s a disaster and Iranians go to the street. The leaders are clinging to any straw available and now the economic agreement with China is more welcome as ever. But at what price?!

China has many different interests in Iran, like oil, ethnic aspects, and last but certainly not least strategic aspects of the planned new silk road, the so-called Belt and Road initiative (BRI). This initiative is of utmost importance to China. Even in matters of oil Iran is not the sole aim of China and in fact, the trip for the signing of the agreement was made by the foreign minister Wang, and not by the president Xi, and as a part of a six countries tour, covering Saudi Arabia, UAE, Turkey, Oman, Bahrain. This is seemingly not an agreement of high interest to China. In fact, after Wang left Iran, his spokes-man answering questions was cited saying: “The plan focuses on tapping the potentials in economic and cultural cooperation and charting course for long–term cooperation. It 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.”

Moreover, Iran is traditionally West-oriented and China has in the US and Europe the main markets. At nearly US$550bn versus US$30bn (although underestimated because of sanctions), China’s bilateral trade with the US dwarfs its bilateral trade with Iran. Considering the planned security cooperation, it seems unlikely that China will step up its regional activity, considering her interests in Saudi Arabia and UAE. Beijing has not sold UAVs to Iran, as it has to GCC countries, nor partnered on local weapons production, and the lifting of the United Nations arms embargo against Iran in October 2020 has not led to a flurry of Chinese arms purchases.

Chances of implementation are so low, that the question arises, why would Iran enter such an agreement. In fact, Iran lowers expectations while hiding the specifics of the agreement. Reza Zabib, head of East Asia at Iran Foreign Ministry, responded to the question, why the text wasn’t published, in saying “there is a legal requirement to publish agreements; however, the publication of non-binding documents is not common.” To start with, the agreement is a show of strength for the Iranian government, which is critical at this point in time. In view of ongoing US sanctions, it should provide stability to the oil sector with a strong client. Iran may achieve Chinese investments in the oil industry to improve production as well as in the free trade zones, which at the time can’t even attract local investors.

For China this agreement is possibly just another square on the Asian chess board. China takes precautions in view of a possible further deterioration of the relations with the West, especially in view of the QUAD initiative. Evidently, Xi visited Iran already in 2016, but only shortly after the QUAD-leaders summit in March 2021, foreign minister Wang came to sign the agreement during a tour with an almost contrary agenda. The agreement at the very least gives China massive new strategic leverage in the Gulf region and in the area that controls 20% of the world petroleum supply. It makes Iran a means to an end much more than a strategic ally.

The Iranian people understands that it’s being sold out, not to the highest bidder, but to the only buyer. For one, many in Iran believe that this agreement may end in Iran being but a protectorate of China. Mahmud Ahmadinejad accused the government of closing secret deals with a foreign regime which do not conform with the national interests and the guidelines of the Islamic revolution. Many citizens criticize Iran’s relations with China even before the new agreement, as cheap products swamp the local market, hurting local producers. They believe that this agreement will ruin the Iranian economy.

In the end this is a Win-Win situation for China. She gets leverage for active negotiations with the surrounding Suni countries, she becomes a feasible coordinator for the west in handling issues with Iran, she gets more possibilities to advance her Belt and Road Initiative, especially in view of the QUAD initiative, she is promised lower oil prices and evidently has signed only a general cooperation framework.

When it comes to Iran, the general impression is that Iran needs this agreement to maintain regime stability. It provides the strong partner for a relatively low price. Therefore, from the regime’s point of view this as a Win-Lose situation with small losses.

From a citizen’s point of view, this is a Lose-Lose situation. Nothing is improving, and should the sanctions stay on, China will not invest, and might even draw back from existing projects, as she has done before in the railroad infrastructure and the stop of involvement in south pars in 2018-19.


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