A New Axis of Power: Iran-China Strategic Partnership and its Implications

The US struggling to recover as a result of the economic downturn and global isolation triggered by the Coronavirus, Beijing senses American vulnerability, feels capable of confronting the US, finds a time to forge a strategic agreement with Iran. The Comprehensive Strategic Partnership between the Islamic Republic of Iran and the People's Republic of China, containing 20 articles and Chinese investment in Iran of $400 billion over 25 years, with $280 billion for the development of Iran's petrochemical sectors and another $120 billion for the country's transportation and manufacturing infrastructure, covers banking, commerce and services, transportation and railway, ports, energy, industry, and dozens of other projects(official text by Iran).

To benefit from Chinese investment and infrastructure projects and confront US domination in the world, Iran has rightly capitalized on China's growing influence across South East Asia, Central Asia, the Middle East and Gulf Cooperation Council countries. A long term Chinese commitment would help Tehran demand greater economic cooperation with Beijing.

Iran, which has a vision of non-alignment with the slogan of neither East nor West since the 1979 revolution toppling its pro-American monarch, is steadily turning towards Asia as part of its Look East strategy. As in 2019,Iran, China , and Russia conducted a joint military exercise in the Gulf of Oman. Moreover, Iran requires both China and Russia, with veto power in UN Security Council, to neutralize US hegemony, and to prevent any kind of sanctions by the United Nations backed by the US. Furthermore, an insatiable oil demand and military and civilian technology push Iran toward an alliance with the rising superpower.

The Sino-Iranian deal, if enforced as planned, would more effectively end Iran's non-alignment and incorporate Iran into the framework of Eurasia. This strategic shift and incorporation into the area of Eurasia region indicate Iran has the capacity to find economic partners and energy consumers among major economies of the continent to quench its economic progress thirst.

The failure of Iran's repeated attempts to improve economic links with the West as a prelude to improved political ties has been a major reason for Iran's move towards China and other Asian countries, regarded locally as the "pivot to the east".

Iran welcomed American and European companies into the country including many energy companies after the nuclear deal was signed in 2015 and offered to buy oil and gas. However, the response to Iranian offers by Western states under pressure from the US was inhospitable. Washington was not interested in improving relations, but instead wanted regime change in Tehran and Iranian leadership soon smelled a rat.

The infusion of a significant amount of cash into its economy, especially its energy sector ($280bn.) and manufacturing and transport infrastructure ($120 bn.) would be a recipe for Iran’s ailing economy and ease its economic burden. No doubt it will create more jobs in the Islamic Republic of Iran and more industrial growth. Iran's deal with China is expected to relieve domestic opposition too. Economic and political progress would boost the regional status of Iran and perhaps allow opponents to reduce tensions with Tehran. Arab states might rush to make their special deal with China.

Iran, which has much of the world's oil reserves and is one of the top five producers of natural gas, had to face an economic shrinkage of around 10 percent, largely due to the reintroduction of US sanctions. Because of COVID-19 outbreak, Iran 's economy hit hard with the lowest oil and gas output. Oil output and revenues have plummeted — falling from nearly 4 million bpd in 2018 to just 2 million bpd nowadays,reported by the New York Times.

The supreme leader, a staunch advocate of an alliance with non-Western powers, sees this deal more reliable than Western power , i.e. the US or Europe. President Trump's decision to scrap the Iran nuclear deal (2015) further intensified public emotions. President Hassan Rouhani, who once wanted to open avenues with the West, also advocated greater cooperation with Asian economies like China, Japan , and South Korea. Following the futile effort to reopen Iran 's economy to the West after the nuclear agreement, he now tries to negotiate a fair agreement with the only major world power whose economic weight can match that of the US or Europe.

Iran is in dire need of civil and military cooperation and voice on a global scale, which can only be achieved by aligning itself with a superpower with enormous investment potential in multidimensional sectors.

In addition, Iran wishes to expand its sphere of influence in the Eurasian region by acquiring full membership of the Shanghai Cooperation Organization. To this end, China, the founding member of the organization, is required to support it.

Similarly, the Sino-Iranian deal will help provide Iran with a bargaining leverage with Europe and the US easing sanction in the future as the West will divert its attention towards this holistic agreement. China’s more pronounced interest in Iran should alert the US to review its past approach towards Tehran. It would also serve as a balancing factor in the normalization of relations between the West and Beijing ,which due to Corona and trade war between them is at the lowest stage .

Beijing, оn the other hand, is a big winner and plays a longer game. At Iranian ports,it could enjoy preferential treatment and develop free-trade zones around the country. It will also include discounts for Iranian oil. Iran is to provide a regular and discounted supply of oil to China for 25 years.”China would also develop free-trade zones in Maku, in northwestern Iran; in Abadan, where the Shatt al-Arab river flows into the Persian Gulf, and on the gulf island Qeshm,” according to NYT report.

This agreement promises to greatly enhance China’s position not only in the Middle East, but also in Central Asia, the Black Sea, the Caspean sea and the Meditearean sea. Through this route, Beijing would have a land route to Europe.

Probably, China will have a large security footprint at two new ports expected to be established adjacent to the Strait of Hormuz, through which oil trade passes by 30 to 40% An Oil supply to its market would be assured.

In addition, China's regional position would be strengthened by having a presence on Iranian land, ultimately undermining US strategic supremacy in the Gulf. This could also strengthen China's international position. Deepening ties with Iran is an outcome to safeguard its interests.

The very reason why the US geopolitical supremacy over the world is preserved is the control of the world’s maritime routes in the world. Among nine key maritime channels, the Gulf of Hormuz significantly controls the major global outflow of fossil fuels. The Chinese presence would give stronghold on these waters through which much of the world’s oil transits.

The US assistance to ASEAN countries to limit Beijing's scope and legitimacy on the South China Sea would be of no benefit but to give China more options to use. Similarly, it would be no use for the US to condemn the Hong Kong issue. Providing military and economic assistance to the South-Eastern partners to contain China and labelling violation of the navigation freedom provided under UNCLOS (law of the Convention on the Sea) would not weaken China 's efforts for its territorial claims. China will certainly consider alternatives.

The deal has a provision of China building infrastructure for 5G telecommunications network in Iran. It would provide an opportunity to Chinese telecommunications giant Huawei, a company that is facing US sanctions ,to enter the Iranian market.

It would also bolster China’s new digital currency e-RMB as a way to bypass American financial systems, and reduce the power of the dollar. It would benefit China, the world’s most energy consumer. Furthermore, Iran could find a mechanism to sell its oil while evading US sanctions.

Iran having million barrels of oil and gas, now a burden on Iran’s economy to finance oil storage would ultimately benefit from this deal.If the Iran-China agreement were implemented, it would revive Iran’s economy and consequently stabilize its politics. On the other hand, over the decades, China would have continual energy supply to materialize its vision of connecting the Eurasian region and challenge the world's US unipolarity.

Yet in global affairs, nothing is everlasting. The US returning to Iran’s nuclear deal and lifting sanctions against Iran, and allowing European and American companies to deal with Tehran, may avert Iran's strategic partnership with China.