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Iran’s China Setback – Analysis

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To say that Iranian foreign policy has seen better days would be an understatement. With the passing of each month, as the ripples of the Arab awakening reach new countries in the Middle East, Iran is finding that its popularity and influence in the region is waning.

Even Turkey, who recently dealt a heavy diplomatic and strategic blow to Israel by expelling its ambassador, is snubbing Iran. The expressions of Iranian joy over the latest crisis in Turkey–Israel relations quickly turned to anger over Turkey’s announcement that it will be hosting NATO’s anti-missile system on its soil. The Turks took this decision despite repeated Iranian requests for them to do otherwise.

Iran - China Relations
Iran - China Relations

As important as Iran’s foreign policy standing is to its leaders, when it comes to the regime’s number one goal, its own survival, foreign policy comes second to the economy. It is the economy which keeps the Islamic Republic alive. Iran’s leaders have watched relations with the US collapse, yet they are still standing. Even if their close ally Assad falls, it’s not clear by any means that it could lead to the collapse of the regime. But it’s a different story with the economy. For Iran’s leaders, the margin of error for the economy is far smaller than for its foreign policy standing and influence.

The recent news that China has scaled back its investment in Iran’s gas and oil sector should be particularly worrisome for Iran’s leaders — possibly worse even than events unfolding in Syria, because this directly impacts Iran’s economy, which gets majority of its income from its energy exports. With majority of the world’s oil companies shunning Iran because of sanctions, China was one of the last countries which stood by Iran and its energy sector, which is in desperate need of investment and technological know-how. According to a study in a U.S. National Academy of Sciences publication in 2007, Iran could run out of oil for export by 2015. Lack of investment in the energy sector is one of the major reasons for this forecast.

Even though China has increased its oil imports from Iran, this is unlikely to be of much comfort to Iran’s rulers in the long run. With this latest move, the Chinese government has made it much more difficult and expensive for Iran to extract and export its oil and gas, meaning less of such commodities to sell at a higher production cost in the future.

Iran’s supreme leader badly needs oil income to maintain the loyalty of IRGC and the Baseej. Not all Guardsmen and Baseeji militants are pious religious individuals who believe in the revolution and are prepared to go financially without just to serve the cause. Indeed, it is believed that such people are the disappearing minority. The majority are there because of lucrative business deals which the IRGC receives, as well as subsidies for Baseej members.

With its legitimacy at home at an historical low point, Iran’s leaders need income from the energy sector more than ever before to continue buying the loyalty of the IRGC and other supporting factions. With the recent news from China, they have every reason to be concerned. Less oil at higher costs will mean less loyalty. If there is no money to pay off the Revolutionary Guards, who will guard the revolution?

Iran’s leaders also have good reason to be angry at China. But the man they fear more than China is President Barack Obama.

It is the consensus and credibility that he built which convinced the Chinese to take their recent decision. Otherwise, it is likely that China would have continued to stand by Iran’s energy sector, as they did during the Bush years. The Chinese government came to this conclusion one year after Obama’s diplomatic overtures to Iran, which were rejected. This move convinced Iran’s only other ally, Russia, to join the US camp. Soon after that, the cost of China being the last man standing by Iran’s government exceeded the benefits.

Iran’s leadership is not suicidal. They are very pragmatic about their own survival, and therefore susceptible to pressure. The Islamic Republic has bent under pressure before, and can do so again. With the recent news from China, it will have more reason to seriously think about changing its behavior with respect to cooperating with the IAEA.

Hopefully, this recent development in China, together with Obama’s diplomatic drive, will put more pressure on the government of Iran to change course, and soon. The best outcome would be for the people of Iran to have access to the nuclear energy which they deserve and need, and the rest of the world dealing with Iran secure in the knowledge that its government is respecting human rights and not working on a nuclear bomb.

Meir Javedanfar

Meir Javedanfar has been described as “a respected, Iranian-born writer and analyst specializing in Israeli-Iranian relations” by TIME magazine; a prominent Iranian-Israeli analyst by The Daily Telegraph; “one of the best informed observers” by Asia Times; and as “one of the most objective analysts” by Negarkha, a leading reformist news blog based in Iran. Javedanfar runs the Middle East Analyst website, a subsidiary of The Middle East Economic and Political Analysis Company (meepas).

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