Iran looks to China

Iran looks to China
Iranian President Hassan Rouhani will visit China next month for a regional summit. The goal of the summit is to ensure that all the joint projects between the two countries..

Iranian President Hassan Rouhani will visit China next month for a regional summit. The goal of the summit is to ensure that all the joint projects between the two countries remain intact despite the recent disruption to the Iran nuclear agreement.

Background

Historically, China has maintained trade ties with Iran and Persia for thousands of years. Iran was a crucial stop on China’s historic Silk Road trade route and there is evidence of Chinese travellers in Persia. Diplomatic ties between Iran and China were first established in 1971. China maintained its relationship with Iran following the 1979 Iranian revolution and the ascent of Ayatollah Khomeini into power. Following the imposition of arms embargos by the West, China emerged as an important economic and military partner for Iran.

Today, China is one of Iran's main trade partners, accounting for approximately 22.3% of total trade. Trade between Iran and China has more than doubled since 2006 to $28 billion in 2017. In 2017 alone, their two-way trade increased by 21 percent. According to some estimates, China imports around 10% of its oil from Iran. Iran, strategically located between Europe and Asia, is also an important part of China’s Belt and Road Initiative, which it signed in 2016.

Iran nuclear deal

The Iran nuclear deal, also known as the JCPOA (Joint Comprehensive Plan of Action), was signed by Iran and major powers UK, China, France, Germany, Russia, and the US (the P5+1) in 2015. On May 8th, 2018, President Trump announced that the US would be withdrawing from the “decaying and rotten” nuclear deal. This move was taken against the advice of allies such as France and Germany, whose leaders lobbied for the Trump administration to preserve the deal. Iran has warned that it would not “remain in a deal that has no benefit” and threatened to resume its uranium enrichment projects.

Analysis

The European Union including US allies such as France, Germany, and the UK have expressed their displeasure at the US withdrawing from the nuclear agreement. EU has already begun the steps to ensure companies part of the region can continue their work in Iran. China and Russia have also signalled their support for the Iran deal despite US imposing harsh sanctions on the region.

It has now been revealed that China will host Iranian President Hassan Rouhani for a regional summit. The main agenda is to ensure joint collaborations between the two countries remain intact despite US sanctions on Iran.

“Our hope is that China and Iran will have close consultation on the basis of observing the deal and push forward development of bilateral cooperation,” Chinese deputy foreign minister Zhang Hanhui said at a briefing. “We should together look into how to avoid major disruption of joint projects between the two sides,” he added.

Trump said he wanted a “better deal” from the Middle Eastern nation that would see it accepting permanent limits on its uranium enrichment and missile development programmes. The US government has also signalled that it would be imposing further sanctions on Iran. Experts believe that the developments surrounding the nuclear agreement would push Iran closer to Russia and China.

Li Weijian, an expert in Middle East affairs at the Shanghai Institute of International Studies, said “Trump’s move will undoubtedly push Iran closer to China and Russia in the political sphere, but in practical terms this won’t do China any good. If everyone remained committed to the original deal, Iran would continue to move towards a more open economy, which would give China greater investment opportunities. Now, the US is not only scrapping its deals with Iran but also putting pressure on countries and companies that trade with it, pushing the country further back into isolation.”

The regional summit between China and Iran will take place between June 9th and 10th of this year.

Assessment

Our assessment is that China will use this opportunity to further solidify its relationship with Iran and increase its influence in the Middle East. China could become a primary beneficiary from US’s withdrawal from the JCPOA as it could allow China to demand oil imports priced in yuan. However, political uncertainty and possible sanctions could deter investment from China and Rouhani’s visit will be aimed at appeasing Beijing’s fears. 

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