In early July, Iran’s Foreign Minister Mohammed Javad Zarif in a parliament session argued that there was “nothing secret” about Iran’s negotiation of a 25-year strategic accord with China.[i] In Iran, a country which is neither a member of any significant regional grouping nor has engaged in formal partnership with a foreign country that goes beyond the short-term or tactical, a 25 year-long-term arrangement with a powerful country is bound to invoke heated debates about revolutionary independence and fears of ‘exploitation’ of Iran’s natural resources. In addition to historical memories of a weak, corrupt Qajar monarchy in late nineteenth century giving away monopoly concessions over Iran’s mineral wealth to European powers in exchange for loans, the debate on the 25-year roadmap with China became public after Iran’s former President Mahmoud Ahmadinejad criticised Rouhani government in a public rally for ‘secretly signing a deal’ with a foreign state.[ii]
To be sure, the establishment of 25-year strategic relation with China was endorsed by Iran’s Supreme Leader Khamenei during Chinese President Xi Jinping’s visit to Tehran in 2016 when the two countries inked a comprehensive strategic partnership. Resonating the traditional East-West problematique in Iranian geopolitical vision, Khamenei had argued that the “Westerners have never been able to win the Iranian nation’s trust and that American hostile policies towards Iran have “caused people of Iran and officials of our country to look for developing relations with independent countries.”[iii] Incidentally, “Look to East” had been introduced by President Ahmadinejad (2005-2013) as a correction to Iran’s Western oriented foreign policy during Rafsanjani (1989-1997) and Khatami (1997-2005) administrations, which had focussed on normalising relations with the United States and pursued dialogue diplomacy with European Union focussing on energy, trade and investment and then later on Iran’s nuclear issue. When Ahmadinejad left office in 2013, China having overtaken the European Union as Iran’s largest trading partner in 2010, represented about one-third of Iran’s total trade.[iv] The Rouhani administration had approached dialogue with the West for resolving the nuclear dispute as essential to revive the Iranian economy by re-integrating with the international economy. The Iranian Moderates’ political and economic vision for the country entailed fostering of relatively more open civil society and comprehensive economic reforms including eliminating monopolies of the Islamic Revolutionary Guard Corps (IRGC) and religious foundations to develop a vibrant private sector as an engine of growth.
Since the reformist movement of President Khatami, the conservative clerical elite centered around Leader Khamenei and the IRGC have worried about how and whether the inflow of Western capital and technology can be separated from liberal economic and political values resulting in ‘erosion’ of Islamic and revolutionary values. They have not only favoured ties with the East, especially with China, but have also embraced Ayatollah Khamenei’s concept of ‘economy of resistance’ against comprehensive integration into the international economy. Khamenei has pushed for an economy of resistance as a key concept for reducing Iran’s economic dependence on crude oil exports and strengthening domestic production to make country immune from US sanctions and economic pressures. Instead of being inward looking, it combines import substitution, domestic production with initiatives to enhance Iran’s status by maximising trade, transit and energy ties between Iran and others, especially with neighbouring countries.[v]
In this context, China’s massive presence in Iran’s immediate geo-economic environment, as well as the Belt and Roads Initiative (BRI) are seen as an opportunity to restore Iran’s historic status of being a bridge between the East and the West and provide the framework for Chinese investment in energy infrastructure and transportation projects in Iran. At the same time, Tehran fears Chinese economic domination and reduced competitiveness of Iranian industries in the region, traditionally considered as essential markets for Iranian products.[vi] China’s dominance of energy markets of Central Asia has also reduced Iran’s competitive advantage as these countries no longer depend on Iran to reach global markets. BRI plans to connect Central Asia with the South Caucasus countries through the Caspian Sea and from there on to Europe are also seen as having an impact on Iran’s transit position in the region. Such fears notwithstanding, Iran’s Look to the East Policy 2.0, while spurred by the US withdrawal from the JCPOA and Leader Khamenei’s calls for preferring East over the West, is a response to systemic changes in the global political economy brought about by the rise of new powers in Asia, with China being at the centre of this structural power transition process. At the international level, Iran sees BRI as important for its potential role in creating a balance of power in the US-dominated international political economy.[vii] A key result of the visit of Xi Jinping, immediately following the implementation of JCPOA in early 2016, was that issues of bilateral cooperation between Iran and China in energy, connectivity, industrial capacity and finance were set within the framework of BRI, but the roadmap for 25-year strategic relation was to be mutually agreed upon.
The negotiations for the ‘25-year deal’ only picked up pace in the context of the US ‘maximum pressure’ on Iran and China-US trade wars. In August 2019, FM Zarif after attending the G7 Summit in Biarritz, where President Macron unsuccessfully tried to push the US administration for a ‘pause’ in its pressure campaign, left for Beijing to discuss the roadmap for the 25-year strategic relations. Subsequently, unconfirmed reports emerged in the international media about China receiving 32 per cent discount in crude purchases along with a two-year payment break and $400 billion in Chinese investment in Iran’s oil, gas and transport sectors. It was also granted substantial presence in other sectors ranging from security and telecom infrastructure, health and tourism.[viii]
The intensified US-China rivalry in the context of a worldwide pandemic means both Iran and China are determined to upgrade their partnership against what they describe as an American “unilateralist” threat.[ix]However, at a time Iran is engaged in its protracted struggle against the high incidence of coronavirus, cracks in the elite consensus on developing relations with China came to the fore in April this year, when the Ministry of Health spokesperson called China’s statistics on coronavirus a ‘bitter joke ‘sparking a controversy that led the Chinese ambassador in Tehran to urge the Iranian spokesperson to ‘respect’ the facts and ‘great efforts’ of the Chinese nation.[x] Nevertheless, a hardliner-dominated parliament is likely to endorse the deal with China, which will not only allow revitalisation of the ailing Iranian economy but will also give Iran the much -needed room for manoeuvre in partnerships with other important players who would not like Iran and China entering into a close embrace.
*Dr. Deepika Saraswat, Research Fellow, Indian Council of World Affairs, New Delhi.
Disclaimer: The views expressed are that of the Researcher and not of the Council.
[i]Iran Foreign Ministry Provides Explanation on 25-year Deal with China, Tasnim News Agency, July 8, 2020, https://www.tasnimnews.com/en/news/2020/07/08/2302636/iran-foreign-ministry-provides-explanation-on-25-year-deal-with-china Accessed on 12 July 2020.
[ii]Iran government squeezed over ‘secretive’ deal with China, Al-Monitor, July 10, 2020, https://www.al-monitor.com/pulse/originals/2020/07/iran-government-rouhani-secretive-deal-china.html Accessed on 12 July 2020.?
[iii]Iran will never forget China’ cooperation during times of sanction, January 23, 2016, https://english.khamenei.ir/news/3212/Iran-will-never-forget-China-s-cooperation-during-the-time-of Accessed on 13 July 2020.
[iv]Vatanka Alex, China Courts Iran, Foreign Affairs, November 1, 2017, https://www.foreignaffairs.com/articles/china/2017-11-01/china-courts-iran Accessed on 12 July 2020.
[v]We must develop our economy from inside to combat sanctions: Ayatollah Khamenei, December 27, 2017, https://english.khamenei.ir/news/5370/We-must-develop-our-economy-from-inside-to-combat-sanctions Accessed on 11 July 2020.
[vi]Shariatinia Mohsen and HamidrezaAzizi. 2019, “Iran and the Belt and Road Initiative: Amid Hope and Fear”, Journal of Contemporary China, https://www.tandfonline.com/doi/full/10.1080/10670564.2019.1594108 Accessed on 12 July 2020.
[viii]No, China isn’t giving Iran $400 billion, Bourse and Bazaar, September 20, 2019, https://www.bourseandbazaar.com/articles/2019/9/20/no-china-isnt-giving-iran-400-billion Accessed on 13 July 2020.
[ix]Iran’s Zarif, China’s Wang condemn US practice of bullying, unilateralism, Pars Today, June 24, 2020, https://parstoday.com/en/news/iran-i122979-iran%E2%80%99s_zarif_china%E2%80%99s_wang_condemn_us_practice_of_bullying_unilateralism Accessed on 12 July 2020.
[x]Iran says world misled by China’s inaccurate coronavirus report, Iran Front Page, April 6, 2020, https://ifpnews.com/iran-says-world-misled-by-chinas-inaccurate-coronavirus-reports Accessed on 13 July 2020.