Iranian Geopolitical Logic and the 25 Year Deal with China

Earlier last month, 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. 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 accord with an assertive great power encompassing trade, energy, infrastructure, telecommunication and even military cooperation has not only drawn great deal of attention but has invoked 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.

To be sure, the establishment of a 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, Ayatollah 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.’ Incidentally, “Look to East” was 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. Hassan 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 a 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 the country immune from US sanctions and economic pressures.

In this context, China’s rise globally and massive Chinese presence in Iran’s immediate geo-economic environment, as well as the Belt and Roads Initiative (BRI) are seen in Tehran as an opportunity to restore Iran’s historic status as a crucial bridge between the East and the West. These hopes notwithstanding, Tehran fears Chinese economic domination and reduced competitiveness of Iranian industries in the region, traditionally considered as essential markets for Iranian products. 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, while 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. But Iran’s geopolitical predicament, further compounded by the unilateral US withdrawal from the JCPOA and ‘maximum pressure’ exacting a toll on Iran’s economy and the increasing geopolitical convergence between Tehran and Beijing, as the latter battled its own trade war with Washington, paved the way for upgrading of Iran-China partnership.

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 a 32 percent 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. The fact that the agreement for 25 year comprehensive agreement with China is being negotiated by the Rouhani administration, which had preferred an even-handed policy of deepening Iran’s ties with both East and West in a bid to enhance Iran’s freedom of action and its regional and global standing during an era of global power transition suggests increasing irrelevance of the West in Iranian long-term foreign policy orientation. During his address to Iranian lawmakers, Zarif fended off criticism for his ‘deal’ with China by reminding them that foreign policy cannot be an area of factional clashes, as it ‘falls within the authority of the Leader who sets general policies of the system in the sphere of foreign policy’. Zarif also argued that the agreement for comprehensive cooperation with China was a response to on-going global shift of power to the East and the emerging post-West world .

However, at a time when 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. Nevertheless, a hardliner-dominated parliament is likely to endorse the deal with China, which will not only allow for revitalisation of the ailing Iranian economy but will give Tehran much -needed room for manoeuvre in partnerships with other important players who would not like Iran and China entering into a close embrace.

Deepika Saraswat

Senior Adjunct Researcher, AGA.