A long view of China’s Iran deal

The development, seen from an Indian perspective, appears less challenging in the long run than at present

For the last few days, one of the most discussed developments has been a reported game-changing deal between Iran and China, dubbed the Sino-Iranian Comprehensive Strategic Partnership. The deal, if it is confirmed, will help Iran in gaining an overall infrastructure rehaul thanks to Chinese investments to the tune of $400 billion, while Beijing will have guaranteed fuel supply from the oil-producing nation for the coming 25 years.

The impact of the proposal can be gauged from the proposed amount of investments and the likelihood of it eventually becoming a part of China’s Belt and Road Initiative (BRI). The opening sentence of the document on the deal, as reported in the New York Times, states: “Two ancient Asian cultures, two partners in the sectors of trade, economy, politics, culture and security with a similar outlook and many mutual bilateral and multilateral interests will consider one another strategic partners”.

Advantages aplenty for both sides

One of the most obvious takeaways from the deal is that it will help Iran boost its domestic infrastructure and economy which has been severely struggling due to economic sanctions imposed by the United States. It provides Iran with an alternative boost of investment which will help it overcome the problems because of the sanctions. It will also help Beijing in gaining a space for its infrastructure industry. With the onset of the Covid-19 pandemic the Chinese economy has seen a slowdown and this deal can help it in gaining a new market. Iran itself has been reeling under the effects of Covid-19 and would look forward to an economic impetus.

While the history of the BRI is well known, the global response to it has changed in the seven years since its launch. Chinese investments have proved to be not-so-benign and a number of countries have had a relook at what such a form of commitment may mean. In a number of countries BRI has also become a major political issue.

Iran would have obviously followed up on these developments. But it needs these investments to overcome the challenges of the trade embargo but also to add new cards to its strategic game. By participating in this deal, Iran would also push Europe, and particularly Germany, the maker of Joint Comprehensive Plan of Action (JCPOA) or the Iran nuclear deal, back to the discussion table. Small powers always thrive if they have more options to choose from. Iran would also hope that Chinese banks would be able to bypass sanctions because of their deep engagement with the US economy.

Geopolitical implications

For China, the plans of developing the Jask port in Iran would be a significant achievement. Jask would possibly play the role in the Persian Gulf that the Djibouti base is supposed to play on the Gulf of Aden. The two ports may also operate as a support system for one another. Without doubt, Jask will also play a role for monitoring and technical espionage for the PLA Navy. Moreover, this would also allow China to achieve a better balance between Saudi Arabia and Iran. China has hosted the Saudi king as well as the crown prince in the last four years. China has used its economic clout over the last several years to achieve Saudi silence about the human rights violations against Muslim minority Uighurs in Xinjiang. It would hope that Iran does the same amongst the Shia-majority countries.

By no means would this be the first or a major Chinese investment in Iran. Chinese President Xi Jinping had visited Iran in 2016 in the post-JCPOA era. And deals worth $35 billion have been in place since then. China has been a buyer of Iranian oil and has invested in infrastructure projects in Iran for over a decade. However, it all went south after Trump announced US withdrawal from the JCPOA and fresh sanctions in 2018.

The US-China relationship has been deteriorating for the last few years. The ongoing US-China trade war coupled with the Covid-19 outbreak and the election year rhetoric in the US has pushed the relationship to its limits. China is also aware that actions such as Britain’s changed posture on Huawei, is not without a possible American role.

It appears as if China has also given up its search for global status in the post Covid-19-era and the days of China's peaceful rise are truly over. Its behaviour in the South China Sea, on the Indian border and with countries like Australia shows that it is undertaking unilateral actions to showcase its capacity and intent and elsewhere its behaviour vis-à-vis Taiwan, Japan, Malaysia and Vietnam show that it is gearing up for a hard fight. The Iran deal is part of the same strategy to become a proactive player.

Does India get affected?

A lot of discussion on the developments about the Chabahar-Zahedan rail link have focussed on its implications for India. Quite a few commentators have concluded that India has lost the project to China. However that is unlikely to be the case. The Chabahar-Zahedan link would eventually extend to Zaranj in Afghanistan. The Chabahar-Zaranj project is a key link for India’s land based connectivity with Afghanistan. India’s infrastructure projects in Afghanistan have been developed on the assumption of activating the rapid connectivity for landlocked Afghanistan via the Chabahar project.

India has been invested in the initiative for close to 15 years now and more actively in the last decade after its numerous initiatives for India-Pakistan-Afghanistan received cold treatment from Islamabad/Rawalpindi. Keeping this channel open would be even more crucial as the recent Badakhshan attack was reportedly the first Taliban, IS, Al Qaeda joint offensive. Such a possibility was always on the horizon and that complicates the Afghan security environment even further.

This route is also significant for the International North South Transport Corridor with Iran at the heart of the connectivity network. This project, an outcome of the Ashgabat Agreement, brings East Europe and Central Asia closer to the Indian Ocean. This can be a significant element for India’s connectivity aspirations and once again Chabahar holds the key.

Lastly, the news of Chinese role in Iranian projects would have been received a lot differently in the Indian media had Galwan not happened. Right now, India-China relations are at their lowest point in many years and the developments of June 15-16 have reset the many assumptions about India-China relations. This is reflecting in the way this news about Iran has been interpreted in Indian writings.

Previously, India and China have held bilateral consultations on Afghanistan. India and China as large energy import dependent countries will also play a crucial and possibly cooperative role for stability in the Gulf and in West Asia in the years to come. Seen from this context, it opens up a lot of possibilities and this development may appear less challenging in the longer run.

(Dr Avinash Godbole and Dr Gunjan Singh teach at the O P Jindal Global University. They specialise in China Studies)

The views expressed above are the authors' own. They do not necessarily reflect the views of DH.