Iran's Entrance into China Orbit

The year 2020 is the “year of Rat” according to the Chinese zodiac, which is known to bring new favourable outcomes. This view seems convincing as the geo-politics are favouring China’s rise as the global power. China’s increasing hold in the region of Ladakh, followed by the heated debate in the South China Sea has opened the horizon for the ascend of the Rising Dragon (瑞星龙). Most recently, a report has emerged regarding the compressive agreement between Iran and China, which has possibly taken India out of Chabahar. The changing dynamics have posed serious apprehensions for the United States (US), India and other regional players about the entrance of Iran in the close circle of China.

The deal was projected earlier in 2016 when Xi Jinping visited Iran to increase bilateral cooperation. The timing is essential; the deal was proposed by China 10 months before the arrival of Donald Trump, who has a “maximum pressure” policy against Iran. With Trump about to come into power, China foresaw Iran’s need for an ally and took the opportunity to propose a deal.

It was a long seen coming; after the end of Obama’s “Asia pivot” policy, Trump administration tried to have a different policy approach from that of Obama. Isolation from the west in the form of sanctions by the US forced Tehran to forge an alliance with China, who is willing to invest in Iran. Trump’s signing of the P5+1 nuclear deal with Iran in 2015 and then his withdrawal from the agreement in 2018 deteriorated US-Iran relations. After that, his maximum pressure policy through sanctions and threatening any EU entity which invested in Iran let Tehran search for a new potential economic and strategic partner.

In September 2019, Beijing announced its willingness to invest $400 billion in Iranian oil and gas, infrastructure and transportation sectors. China also intends to invest in telecommunication, ports, banking, railways, Chabahar and other infrastructural sectors. China understands the implications of having ties with Iran, who is suffering from heavy sanctions from the US. This agreement could act as a lifeline for Iran’s vulnerable economy. The deal has been signed for the next 25 years. In response to the Chinese investment, China will receive Iranian oil at cheap rates for the coming 25 years.

For China, the Shia state is important as it provides an opportunity for Chinese goods to travel in the Middle East. Moreover, Chabahar will add a strategic edge while increasing Chinese hold in the Strait of Hormuz and by this, China will have a better watch over the US base in Manama.

It is to be officially announced, but The New York Times has claimed to have received the 18-page draft that talks about the expanding Chinese interest in Iran’s infrastructural development. Such a deal holds diverging implications for Iran, China, Pakistan and the US.

This cooperation will put both the states in a win-win situation as China will be able to expand its influence in the Middle East to counter the US. For Iran, the economic prospect seems convincing. Pakistan is an example of a country that enjoys Chinese investment in the region. As Iran, who had a “neither West, not East” slogan is moving into the Chinese trajectory; the isolation that it felt will be eased once this agreement is materialised and the investment will float in.

For China, the Shia state is important as it provides an opportunity for Chinese goods to travel in the Middle East. Moreover, Chabahar will add a strategic edge while increasing Chinese hold in the Strait of Hormuz and by this, China will have a better watch over the US base in Manama. Chabahar will let China likely have access to the connectivity root from Russian to the Persian Gulf from the potential International North-South Transport Corridor (INSTC).

The hindrance to such a deal could only come from the US, but it is not India whom the US can threaten, it is China who pays no heed to the US pressure over any state and in this case, it’s Iran. China has used the current geopolitical scenario to come closer to Iran. This will create another geopolitical flashpoint for the US and China who are already in a heated opposition in the South China Sea amid the pandemic.

For India, this deal deepens India’s strategic bind in Iran as it has led to a potential Indian exit from Chabahar. Also, the recent news that India has been laid off from the Farzad-b project will offset India’s ambitions of having trade with the Central Asian Republics (CARs) through Iran. Chabahar was considered as India’s strategic magnum opus in Iran, and a bridge between India, Iran, Afghanistan, and CARs. Furthermore, the port was considered as an Indian strategic point to counter Gwadar in Pakistan, which has created much hype in recent years and is of great concern for India.

Once this deal is materialised, it could hinder Indian desire to have an alternative transit circumventing Pakistan. Likewise, it will also let Indian Ocean to become a geopolitical hotspot once China expands grip between the sister ports.

As per the article of the Tehran Times, “Iran won’t wait for India on Farzad-b gas project”, which depicts Iranian pressure strategy towards India to keep the project, that was discovered by ONGC Videsh in 2008. Indian reluctance towards speedy processing of the project due to the fear of investing in a country which is under heavy sanctions, let Iran look toward China who has been keen in increasing its ties with states that follow an anti-US policy. The official news from India’s Ministry of External Affairs has confirmed that India is no longer part of the Farzad-B gas project.

India’s losing grip over the Galwan valley along with increasing diplomatic ties between China and the Indian neighbour Nepal is encircling the Indian aspiration for regional hegemony. Once this deal is materialised, it could hinder Indian desire to have an alternative transit circumventing Pakistan. Likewise, it will also let Indian Ocean to become a geopolitical hotspot once China expands grip between the sister ports.

This deal would help Pak-Iran relations to enter a new phase of cooperation. Working in close proximity for trade and countering terrorism could help both states to form a nexus with China. The future trends regarding such a deal seem promising once Iran enters China Pakistan Economic Corridor (CPEC) as Iran is already part of the One Belt One Road (OBOR) initiative and has shown interest in CPEC. This deal will help Pakistan to relieve the Indian factor from the Iranian front while assisting Pakistan to reach its trade potential with Iran.

For China, cordial Pak-Iran relations will be an utmost priority as Pakistan is its all-weather friend, and Iran will be the new strategic partner in the region. Stable relations will boost the prospect for interconnectedness in the sectors like energy and combating terrorism, where Iran and Pakistan are interested. Pakistan can utilise this closeness to complete the “pipeline of peace” which has been completed from the Iranian side, but Pakistan was reluctant, due to the Indian factor. With India out of Iran, Pakistan will be at ease, because Indian cooperation in the form of investment was seen as a matter of national security by Pakistan.

This deal will help Iran to curb the economic impacts that the US-led sanctions have posed towards them. As the region will remain a hot topic, all eyes will be on future trends in China-Iran relations. For Iran and China, this deal will help both states to work in close cooperation in economic and strategic domains.

Ali Zafar

Ali Zafar

Mohammad Ali Zafar is currently pursuing a degree in International Relations from the National Defence University, Islamabad.

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