Reconfiguring Iran-China relations

As many analysts anticipated, Iran and the great powers, the so-called P5+1 (France, UK, Germany, the US, China, and Russia), fell short of hammering out a comprehensive deal before the November 24 deadline, necessitating a second extension of an increasingly high stakes series of negotiations to July 2015.

Understandably, much of the media coverage of the nuclear talks focused on unprecedented and wide-ranging bilateral talks between Tehran and Washington. The two powers are contemplating the possibility of a “neither foes, nor friends” relationship in the coming years. The emerging consensus is that an Iran-US entente is critical to the stabilisation of a fragile regional order in the Middle East, which has been ravaged by sectarian conflict.

Fewer analysts, however, have paid close attention to the motivations and ambiguous interest of Eastern powers such as China in the Iranian nuclear talks. Generally, China has been the most low-key participant in the Iran-P5+1 talks, with its diplomats largely confined to the sidelines of the negotiations. Although China is seen as sympathetic to Iran, and it has an interest in the stability of the oil supply in the Middle East, it has also been among the biggest – if not the main – beneficiaries of Iran’s isolation in recent years.

Western unilateral sanctions have allowed Chinese companies to reinforce their foothold in Iran’s strategic economic sectors, particularly in infrastructure and energy. Improved ties between Iran and the West, especially the US, however, could undermine China’s domination of the Iranian economic landscape and redraw the strategic landscape in the Middle East.

Eastern powers

As Iran’s neighbour (in the Caspian Sea) and main partner in the provision of nuclear technology, Russia is also seen as amenable to a de-escalation of geopolitical tensions over Tehran’s nuclear programme. Russia is understandably worried by the prospect of a post-sanctions Iran emerging as a key alternative supplier of natural gas to Europe. With the world’s second largest reserves of natural gas, mostly untapped, Iran is a perfect candidate to undermine Russia’s energy chokehold on Europe.

Nonetheless, the last thing Moscow wants is another major western military intervention close to its chaotic underbelly, the Caucasus. By supporting countries such as Iran and Syria, Russia has tried to stem a full-fledged western domination of the Middle East – and encirclement by NATO.

In recent months, Moscow has been involved in creative efforts at exploring various mechanisms to assuage Iran’s concerns with access to enriched uranium, which is crucial to breaking the deadlock in the negotiations.

Iran and China, meanwhile, are largely seen as natural allies. Both countries are heirs to proud and powerful empires, which dominated the western (from Achaemenid to Safavid empires) and eastern (from Qin to Ming empires) edge of the Asian continent for more than a thousand years, respectively. Their modern, revisionist foreign policy calculus has been shaped by their shared experience of a century of humiliation at the hands of western powers, from the mid-19th to mid-20th century.

For decades, China has been a critical source of technology, both civilian and military, for (pre- and post-revolution) Iran, which, in turn, has been a key supplier of hydrocarbon resources. This mutually-beneficial dynamic has underpinned a marriage of convenience. Earlier this year, China and Iran, for the first time in history, conducted joint naval exercises in Iranian waters, providing Beijing a valuable strategic presence in one of the most important Sea Lines of Communications (SLOCs). US naval dominance in SLOCs such as the Strait of Hormuz has been a constant source of worry for China, which heavily relies on importation of hydrocarbon commodities from the Middle East and Africa.

China’s shadow

Since 2011, however, Iran’s historically self-sufficient economy has become increasingly reliant on China – a top trading and investment partner. Chinese state-owned companies have expanded their stakes in Iran’s vast energy sector.

Western sanctions against Iran have driven away leading European companies, which played an important role in Iran’s industrialisation and the development of its energy sector. Financial sanctions on Iran’s banking sector, particularly its central bank, have also forced Tehran to engage in an unfavourable barter trade with China, which has flooded the Middle Eastern country with commodity exports.

Chinese economic dominance has created a nationalist backlash among many Iranians. After all, a leading slogan during the 1979 Iranian Revolution was “Na Sharghi, Na Gharbi, Faghad Jomhori-e-Eslami” (Neither East, Nor West, only the Islamic Republic). Domestic manufacturers as well as ordinary Iranian consumers have lamented the influx of cheap, substandard Chinese products.

Irked by excessive delays, and China’s tendency to not honour its large-scale investment pledges, the Iranian oil ministry has also terminated a $2.5bn buyback contract with China National Petroleum Corporation in the much-prized South Azadegan oilfield.

This is why the Iranian nuclear negotiations are extremely important to Iran. Under President Hassan Rouhani’s administration, a pragmatic-nationalist government has pushed for normalised ties with the West, precisely because Tehran doesn’t want to be in the shadow of any major power. A final nuclear accord could dramatically reconfigure Iran-China relations, providing Iran much-needed access to more advanced western technologies and reducing geopolitical tensions between Tehran and Washington.

The Iranian nuclear negotiations are ultimately about securing Iran’s independence by diversifying its foreign relations and ending a years-long economic siege. It remains to be seen how China will maintain its privileged partnership with Iran if and when a nuclear accord is reached.

Richard Javad Heydarian is a specialist in Asian geopolitical/economic affairs and author of How Capitalism Failed the Arab World: The Economic Roots and Precarious Future of the Middle East Uprisings.