China, feeling America’s domestic political difficulties amid social justice protests and a poor reaction to COVID-19, is taking off its gloves: Beijing is in the final stages of approving a $400 billion economic and security agreement with Tehran. In addition to large infrastructure investments, the agreement provides for closer cooperation in defense and intelligence exchange, and appears to come with discounts on Iranian oil. If completed, the CPR would gain a major influence in this geopolitically critical region and launch a lifeline into the regime of the bespo autched mullahs.
The United States is likely to push back against this partnership, which threatens US security and energy interests in the Middle East and Eurasia. It’s little secret that Washington’s foreign policy interest constantly clash with those of Tehran and Beijing.
In the twentieth century, America’s main political rival, the Soviet Union, whose cave in 1991 marked the beginning of the unipolar world of the past due to the 1990s and early 2000s. In the 21st century, the new “quasi” competitor of the United States is not consulted: the People’s Republic of China, a country with a much larger economic base than the USSR. The China Belt and Road (BIS) Initiative, the flagship of Chinese President Xi Jinping’s global ambitions, is a tough political tool that tests the influence of U.S. foreign policy.
As for geopolitical strategy, there is a saying among foreign policy experts: Russia plays chess, China plays Go and the United States plays football. Iran, with its strong anti-American sentiment, vast military reserves and vast hydrocarbon reserves, is a component of China’s Go World Council.
The China-Iran agreement is the newest step in Beijing’s attempt to move from regional hegemony to a global force through the BPI. China is criticized by Western political analysts for its so-called “debt diplomacy,” an economically weak country’s debt policy with predatory investment programs. This is often seen as a lever to capture key infrastructure, one of the most notable examples being the port of Hambantota in Sri Lanka, which the government was forced to lease to China for 99 years after failing to repay Chinese loans. Similarly, Pakistan owes China at least $10 billion in debt for the gwadar port structure and the territory is leased to the Chinese government until 2059. Another country in the region, Maldives, owes China approximately $1.5 billion in debt, or about 30% of its GDP.
The giant deal with Iran would increase Chinese investments in Iranian banking, telecommunications, and transportation infrastructure including airports, railways and free trade zones (FTZs). China is also eyeing a central role in Iran’s cyber space with the country offering “greater control over what circulates.” The prospective agreement also extends a number of potential defense cooperation projects and underscores increased intelligence sharing.
While the agreement may also give new life to the economy smothered by Iran’s sanctions, it would possibly also inevitably leave the Islamic Republic in debt to Beijing. Many members of Iran’s geopolitical elite perceive it.
Beijing is exploiting tehran’s developing depression exacerbated by COVID’s aptitude and economic crisis. Recent cyberattacks on its nuclear and naval infrastructure are also pushing the government into China’s arms. After all, the emerging super-strength provides an insatiable oil market, military and civilian technology, large investments and political policies on the global stage, adding veto force in the UN Security Council, all that Iran urgently needs.
Both countries see the deal as mutually beneficial, but also as a potential mechanism for confronting US dominance in the Middle East.
Iran is one of the five most sensitive manufacturers of herbal fuels in the world and owns 15% of OPEC’s crude reserves, however, in October last year, its economy is expected to shrink by 9.5%, mainly due to the reintroduction of US sanctions. Oil production and revenues have fallen from approximately four million b/d in 2018 to just 2 million b/j today. This disastrous scenario preceded the COVID 19 outbreak, which heavily affected Iran (and crushed demand for its main export product).
Clearly, the anti-American edge of the deal is what attracts Washington’s attention. It would bolster China’s new digital currency e-RMB as a way to bypass American financial systems, and reduce the power of the dollar. It would also serve to benefit the world’s most voracious energy consumer and provide a mechanism to sell Iranian oil while evading US sanctions policy.
China’s strategic investment, combined with the military’s cooperation, would bring to life one of the highest anti-American powers, would threaten U.S. allies. In the Middle East from Riyadh to Jerusalem and would grant privileged Chinese corporations billions of dollars in hydrocarbons and untapped markets. India, which has historically had smart relations with Iran and recently clashed militarily with China in the Himalayas, looks wearily at the double fence that Beijing is wearing in opposition.
But there is some Iranian fear about China’s full economic embrace. Last June, former President Mahmud Ahmadinejad warned in a speech that policymakers were “delivering Iran’s purse to other countries without informing the nation.” Others have since subscribed to the criticisms, adding former conservative lawmaker Ali Motahari, who gave the impression of recommending on Twitter that before the pact was signed, Iran deserved to raise the fate of Muslims who would be persecuted in China, and Crown Prince Reza Pahlavi, an exiled opposition leader will be inscribed in the warring parts of the agreement.
It also takes into account that while China likes to communicate a wonderful game about its BIS initiative, it is increasingly transparent that Beijing’s goals are too high for its own good. While COVID-19 is hampering the trend toward globalization, Central Asian countries, the cornerstone of China’s belt and road ploy are also watching their economies slow. The BPI’s ground direction has also been criticized for its waste and fraud, which is in fact a component of a broader scheme.
The United States will continue to take opposing action on any Chinese company that violates sanctions, according to a U.S. State Department source. Beyond that, the companies involved in the China-Iran honeymoon will do so at their own risk, while the main economic and security hazards are mitigated through Beijing’s strategic commitment, concentration and implacability.
With david Pasmanik and James Grant
I am a senior member of the Atlantic Council and principal founder of International Market Analysis, a global threat consulting firm in Washington, DC. I advise you