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The Ayatollah’s Dragon: Does China See Opportunity In An Isolated Iran? – Analysis

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By Kabir Taneja

Iran’s isolation by the US, following the withdrawal by President Donald Trump from the JCPOA nuclear agreement has pushed Tehran into a corner. As its economy significantly weakens, Iran has looked towards Europe, led by Paris, to salvage some sort of middle path at the very earliest.

Even as Iran’s sense of feeling cornered plays out, some nations see opportunities in these nooks of global geo-political disruptions. “Iran is the center of everything,” a Chinese businessman operating in Iran during the period of sanctions said back in 2017 as Tehran was touted to benefit immensely from Beijing’s mammoth Belt and Road Initiative (BRI). China is already Iran’s biggest trading partner, and has steadily built capacity as western businesses and governments stepped away due to the collapse of the JCPOA amidst the US withdrawal in 2018.

Now, the Chinese may be courting Iran even more aggressively. Details of an extensive deal spread over 25 years between Tehran and Beijing reported in the media suggested a mammoth move by Beijing to prop up the Iranian economy, specifically its oil and gas sector which lies in a derelict state. Iran has put its recoverable oil reserves in 2019 at 160 billion barrels, which would make it the world’s third largest reserves.

The deal suggests a $280 billion infusion into the country’s petrochemicals sector along with further $120 billion to upgrade the country’s transport infrastructure and manufacturing sectors. Railways are one area where Iran would greatly benefit. Proposed projects ironically include rail lines connecting Iran with the troubled Xinjiang province in China via Central Asia, home to internment camps where hundreds of Uyghur Muslims are kept in detention to undergo religious “re-education” camps. Iran has not overtly criticized China on its treatment of Muslims in that region till date.

Along with the above, reports also suggest that the Chinese may look into stationing up to 5,000 “security personnel” on the ground to protect their investments and projects. Deployment of such strategic military assets abroad by China is an inevitable eventuality, as the Asian giant increasingly sees itself as an equitable power with the US and steadily builds both economic and military capacity to counter American supremacy in Asia, and eventually, beyond. It already operates a military base in Djibouti, in the Horn of Africa. There have been murmurs of another base to be setup in northern Afghanistan as well.

Despite all these impressive numbers being thrown around, in the case of Iran and China these reports may offer more of a play of strategic leverage and messaging to the West, more from Iran than concrete plans from China. However, even so, it showcases the capacity Beijing is expected to infuse in its partner states, specifically where the US power is witnessed as being in recession along with offering an alternative to Western money and influence. The report by Petroleum Economist, which broke the news, has only quoted Iranian officials who have given most of these figures. The Chinese vision behind this story is yet to be ascertained.

Nonetheless, a massive economic push in Iran may not be as easy as it may sound for China. Beijing is also close to becoming the biggest trading partner of Israel, which traditionally has had the US fill that role. In 2017, Israel’s Prime Minister Benjamin Netanyahu had said that the Israel – China partnership is a ‘marriage made in heaven’. Also, China’s deepening ties with the Gulf Cooperation Council (GCC) pushed through by President Xi Jinping’s visit to the UAE last year, where he was escorted in by UAE air force jets and presented a sensational welcome, showcases a new paradigm for Beijing in the region thanks to its economic prowess. Amidst all this, China will require to do what its regional neighbors such as India have been doing for a long time in the Middle East, walking a tightrope between the Shia, Sunni and Jewish power quarters. While all regional power centers in Jerusalem, Riyadh and Tehran alike would like a piece of the Chinese pie, so realistically, if Beijing stations troops in Iran and indeed goes ahead with a multi-billion dollar sprucing up of the country’s crumbling infrastructure, it is more than likely that the likes of Saudi and Israel would strongly let their displeasure be known and pivot even further towards the US on issues such as trade.

In fact, the ensuing trade war between the US and China may make a stronger push by Beijing to ruffle some feathers. Iran’s vast oil wealth has a large consumer in Asian economies such as China and India, with the former initially treading lightly on the Iran’s nuclear program and avoiding confrontation with the US on the issue. However, with Trump now aiming his crosshairs towards the Chinese economy, Beijing’s niceties earmarked for the US may have subsided significantly, and Iran presents itself as a geo-political vacuum that China can fill in with relative ease, both as an economic opportunity and one where it can one-up Washington. By doing this, Beijing could also ramp up pressure on the Trump administration via France, Germany and other European states that have significant interests in Iran adhering to the JCPOA and opening up its economy.

For India, a strong movement by China into Iran at this juncture could raise significant concerns. Both New Delhi and Tehran have wrangled over years regarding the development of Chabahar port, which began commercial operations earlier this year, also offering a new alternative to Afghanistan to export and import from. The Chabahar project, on blueprint, has the potential to bring Central Asia and India closer via connectivity projects in areas of energy, transport, people-to-people contact and so on. Many of these blueprints however have remained mere plans and drawings, with little to no intentions of fructifying into mass, capital intensive projects. While India’s economy remains comparatively constrained to undertake such projects on mass, China is now capable of doing the same with relative ease. But can it achieve this in Iran at the advertised scale? Probably not.

As mentioned earlier, the numbers in the recent reports are only offered by the Iranian side that may be looking to create its own narrative against the US, which is currently embroiled in a trade war with Beijing. These narratives also allow Iran to create a kerfuffle in Europe, with France already in talks with them over a $15 billion package in return for their return to the tenants of the JCPOA agreement.

If the Ayatollah in Tehran, who controls almost all political decisions, wants the Chinese dragon to bail it out against the West, the Supreme Leader himself along with the Islamic Revolutionary Guard Corps (IRGC) which directly reports to him stand to lose out the most as they collectively control many of the country’s businesses and industries, including those amassed as spoils from their campaign in Syria.

China’s approach to the Middle East is not too different from that of India’s. Beijing for now stays away from regional tensions, and avoids making moves that would showcase it as taking sides. China however needs markets, and natural resources for its economy, to continue its developmental juggernaut consistently in the future. Nonetheless, despite the platitudes, Iran would offer a very difficult ecosystem for Beijing to operate in and the numbers being thrown around by Iran are fibbing their way to the headlines at best at this point of time.

As a French diplomat once said, ‘sanctions or no sanctions, Iran is just a difficult state to deal with’.



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Observer Research Foundation

Observer Research Foundation

ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

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