China’s Iran Bet

By Jeffrey S. Payne | Research Fellow/Academic Affairs Manager - National Defense University's Near East South Asia Center for Strategic Studies | Jun 8, 2015
China’s Iran Bet
Presidents Hassan Rouhani & Xi Jinping

This essay is part of the series “All About China”—a journey into the history and diverse culture of China through essays that shed light on the lasting imprint of China’s past encounters with the Islamic world as well as an exploration of the increasingly vibrant and complex dynamics of contemporary Sino-Middle Eastern relations. Read more ...


 

China is deepening its footprint in the Middle East. Equipped with a strategic vision for what it calls “West Asia” and thirsty for Gulf energy deposits, Beijing hopes to enhance its presence without becoming ensnared by the region’s conflicts. Yet Beijing’s preference for avoiding conflict may prove problematic with a more robust relationship forming between China and Iran. China needs partners within a region where it has no long-standing relationships. Iran offers a unique platform for China’s ambitions in the Middle East, and as such Beijing is willing to bet that the benefits of closer ties with Tehran will outnumber the costs. This analysis examines the calculations China is making regarding its relationship with Iran and argues that deepening bilateral ties reveal the centrality of Iran for China’s Middle East strategy.

China’s Push West

China’s economic success has led to its dependence on foreign sources of energy in order to fuel industries that will require ever-increasing amounts of power. China has sought to mitigate the risks associated with this dependency by diversifying its sources of supply. Chinese state energy firms, such as Sinopec and Sinochem, together with Chinese banks, have forged partnerships in Africa, Latin America, and elsewhere in order to secure long-term energy supplies. Yet for Chinese security and military professionals, reliance on energy imports has been a constant source of concern, mainly because most of these supplies, which are transported by sea to Chinese ports, must traverse the Straits of Malacca, a narrow maritime “choke point” that could be blockaded by opponents in a time of conflict.

Since the 1990s China has invested in ways to alleviate a total reliance on sea transport. The Kazakhstan-China oil pipeline, initiated in 1997, became operational in 2009. The same year, the Sino-Turkmenistan gas pipeline was completed. In 2014, a gas pipeline passing through Myanmar was completed as well. Beyond diversifying supply, these pipelines and related infrastructural projects in Southeast and Central Asia also guard against supply disruptions that might occur at maritime chokepoints in the eastern Indian Ocean. 

However, a more fully formed strategy―marked by a distinctly westward-looking orientation that encompasses the Middle East―emerged only with the accession to power of President Xi Jinping in 2012. The first inkling of such a strategy became public that year when Wang Jisi of Peking University, one of China’s leading strategic thinkers, called for a major push into continental Asia.[1]  It was a bold call to action that was framed both within and outside China as a means to enhance China’s security while also serving as a counter to the United States’ rebalance to Asia. The initial piece written by Wang presaged a flurry of activities by the Chinese state: the development of the Shanghai Cooperation Organization (SCO) from being a minor regional organization focused on trade into a source of Eurasian partnership on economic, security, and political issues; steps toward the expansion of the SCO through the admission of new members (India, Pakistan, and Iran);[2] the signing of a long-delayed natural gas deal with Russia;[3] and the establishment of the Asian Infrastructure Investment Bank (AIIB).[4] Viewed together, these initiatives form a pattern, one that suggests a new strategic orientation toward Eurasia.        

On Belts and Roads

Most of China’s moves to its west have focused on enhancing ties with Russia and developing partnerships with the countries of Central and South Asia. There was little evidence to indicate a clear connection between China’s push west and Sino-Middle Eastern relations. However, this changed with the articulation of China’s One Belt, One Road (OBOR) initiative,[5] a grand strategy intended to tie the nation states of the Asian continent to China along a modern “Silk Road.”

President Xi first mentioned OBOR during a September 2013 trip to Kazakhstan, but it was not until March 28, 2015 that the Chinese state provided greater clarity on the strategy.[6]  OBOR is a proposed network that follows both overland and maritime routes to connect the economies of Southeast, South, Central, and West Asia to China. Terminating in Venice, Italy, the historic western end of the old Silk Road, OBOR is the first Chinese strategic concept that includes a special focus on the Middle East.

The maritime Silk Road proposed by China flows south from China through the straits of Southeast Asia and from there to Europe, but not before first detouring into the Gulf. The overland Silk Road moves from China’s western borders through Central Asia and into the Middle East before also arriving in Europe. Various maps of the two roads and official statements made by Beijing conceive of the Gulf as just another stop along the road.[7] But make no mistake: OBOR is, in part, about enhancing China’s position in the Gulf.

China has explored and exploited relationships with many nations in order to obtain energy and to gain market access, but one region that retains substantial growth potential is the Gulf―and more specifically, Iran. China’s footprint in Iran is far shallower than Beijing prefers. OBOR contemplates, and indeed necessitates, the expansion and deepening of that footprint.

China is interested in purchasing greater amounts of gas, petroleum, and minerals from Iran. Although Iran has abundant deposits of these resources, the modernization of its energy, metal, and mining sectors is long overdue. The petroleum sector fails to meet a host of computerized, mechanized, and efficiency standards that would greatly assist in extraction, processing, refining, and shipment.[8] As for the natural gas sector, much of Iran’s substantial gas fields remain underutilized. Iran’s promising metal and mineral mining sector lacks advanced technology and is inefficient.  

To be sure, China’s desire to access Iranian resources is an important element of China’s economic diplomacy. However, it is Iran’s geostrategic position that matters most to Beijing. Of the entire Middle East, the Gulf region is the most important for China. Yet the long-standing relationship between the GCC and Western powers, particularly the United States, makes it difficult for China to develop closer ties beyond the narrow scope of a supplier/consumer relationship. Iran, however, is a Gulf state that has been isolated from much of the West for over 30 years. Furthermore, the overland Silk Road cannot effectively connect the east to the west without Iran as an integrated part. Central Asian republics want to use Iran as a mechanism for accessing maritime trade, and if the larger Middle East is to be connected to the overland Silk Road, then the most efficient path goes through Iran. Finally, it is worth noting that the Gulf is a linchpin of China’s interests in Africa, inasmuch as Chinese trade, investment, and development assistance to the continent flows through the Gulf region.

With Chinese investment picking up throughout the Middle East and a larger presence of expatriate Chinese workers, there is greater demand for China to be able to project national strength into the region. China can accomplish this aim from its home shores, as has been shown by the continuous deployment of People’s Liberation Army Navy (PLAN) vessels in the Gulf of Aden to conduct anti-piracy operations.[9] Eventually, however, China will have to develop a regional strategic partnership in order to secure a friendly base of operations. Of the major regional powers (Egypt, Turkey, Saudi Arabia, Israel, and Iran), Iran is China’s only realistic option. 

Developing closer bilateral ties will not be easy. After all, China’s and Iran’s strategic ambitions, political cultures, and economic structures and capabilities differ. Nevertheless, Chinese think tanks and universities have instituted a series of regular bilateral and multilateral engagements with Iranian academics, diplomats, and military officers in order to facilitate greater communication. The objective of these interactions is to facilitate a closer government-to-government relationship. Engagement seems to be working. Sino-Iranian ties are as strong as they have ever been, characterized by regular high-level meetings,[10] an increase of port calls by PLAN vessels,[11] and diplomatic cover provided by China in certain areas relevant to Iran’s nuclear program.

China does not conceive of OBOR as a military strategy. Nor does Beijing appear to have any imminent plans to use Iran as a security partner. Yet the bilateral relationship has evolved in a way that allows China more options than with any other regional state. The status of Iran’s nuclear program remains the single major roadblock to the further development of this relationship.

P5+1 Calculations

Most of the global attention focused on the nuclear talks has been on Iran and the United States. And rightly so. Of the seven countries participating in the negotiations, the United States has been the most vocal regarding its opposition to Iran acquiring nuclear weapons. Likewise, Iran sees the United States as the biggest impediment to the advancement of its national interests.   

Far less attention has been paid to China’s participation in the talks and its strong desire that a final nuclear agreement be reached. The role that China has played in the negotiations and its stakes in their outcome deserves closer scrutiny. Throughout the negotiations the Chinese delegation has quietly pushed both sides toward  compromise. The Chinese negotiating team helped to soften the Iranian position regarding the pace of sanctions removal while at the same time staking out a position in the talks that, while being roughly compatible with Russian and Iranian objectives, did not undermine the UN framework. The primary impetus for China’s investment in efforts to produce a nuclear agreement is its overriding aim of clearing the way for the successful implementation of OBOR. Simply put, without such an agreement and the subsequent lifting of sanctions, OBOR is unlikely to succeed and China’s aspirations to access Iran’s natural resource wealth will be greatly inhibited.[12]     

Discussing Costs

In Iran, China has potentially found a strong, reliable partner that appears to be ascendant in the region.[13] If a final nuclear agreement is reached and sanctions are lifted, Beijing will be able to pursue new economic opportunities and further secure its energy interests. Yet a more extensive and enduring strategic partnership with Iran would almost certainly complicate China’s relations with its Gulf Arab partners, notwithstanding Beijing’s protestations that its behavior is principled and its record of non-interference is unblemished. Here, China’s position on the Syrian conflict and Arab reactions to it are revealing. China’s stance on the Syrian civil war falls in line with its traditional ideological orientation. Beijing never invested heavily in Syria and thus saw no national interests at stake as the conflict materialized. Official statements have favored a political settlement between the Assad regime and the opposition in order to return the country to stability.[14] This approach to the Syrian conflict is neither surprising nor controversial within China. However, Beijing’s stance nonetheless has been viewed by many Arab states as support for the Assad regime.

One can expect an even sharper divergence in views if Sino-Iranian relations become more extensive, as China would undoubtedly be seen by most of its Arab counterparts as feeding Iran’s regional ambitions, irrespective of Beijing’s claims and justifications. Thus, whereas from the Chinese perspective integrating Iran into OBOR is rooted in economics and could serve as a vehicle for enhancing regional stability, from the Arab perspective such a development would likely be regarded as inimical to Arab interests and even threatening, given the current depth and intensity of Iran-Arab Gulf acrimony.

Conclusion

Beijing needs a partner in the Middle East, and more signs point to Iran being the preferred candidate. China’s energy requirements, its immersion into global trade, and a more  assertive foreign policy are pulling China in the direction of the Middle East. With the emergence of the One Belt, One Road initiative, the Xi administration has provided a strategy that encompasses all of Eurasia and approaches the Middle East outside of the traditional supplier/consumer dynamic. In simple terms, China is moving to project power throughout the Middle East and, more specifically, the Gulf. Observers of China’s foreign policy and Middle East analysts should carefully monitor the China-Iran relationship, as it will provide key insights into both the scope and scale of Chinese strategy.




[1] Wang Jisi, “‘Western March,’ Rebalancing China’s Geopolitical Strategy,” The Global Times, October 17, 2012, http://opinion.huanqiu.com/opinion_world/2012-10/3193760.html.

[2] Shannon Tiezzi, “The New, Improved Shanghai Cooperation Organization,” The Diplomat, September 13, 2014, http://thediplomat.com/2014/09/the-new-improved-shanghai-cooperation-org....

[3] James Paton and Aibing Guo, “Russia, China Add to $400 Billion Gas Deal with Accord,” Bloomberg, November 9, 2014, http://www.bloomberg.com/news/articles/2014-11-10/russia-china-add-to-40....

[4] “China, India Likely to Be Biggest Shareholders in AIIB,” Reuters, May 22, 2015, http://www.reuters.com/article/2015/05/22/us-asia-aiib-idUSKBN0O70942015....

[5] “Full Text: Visions and Actions on Jointly Building Belt and Road,” Xinhua, March 28, 2015, http://news.xinhuanet.com/english/china/2015-03/28/c_134105858.htm.

[6] “Chronology of China’s Belt and Road Inistiative,” Xinhua, March 28, 2015, http://news.xinhuanet.com/english/2015-03/28/c_134105435.htm.

[7] Reid Standish and Bethany Allen-Ebrahimian, "Interactive Map: Follow the Roads, Railways, and Pipelines on China's New Silk Road," ChinaFile, May 11, 2015, http://www.chinafile.com/reporting-opinion/media/interactive-map-follow-....

[8] “Iran to Spend Up to $4.8 Billion from Sovereign Fund on Oil Development,” Reuters, February 4, 2015, http://www.reuters.com/article/2015/02/24/us-iran-budget-oil-idUSKBN0LS1....

[9] Christopher D. Yung and Ross Rustici, with Scott Devary and Jenny Lin, “'Not an Idea We Have to Shun:' Chinese Overseas Basing Requirements in the 21st Century,” China Strategic Perspectives 7 (October 2014) (Center for the Study of Chinese Military Affairs, Institute for National Strategic Studies, National Defense University), http://ndupress.ndu.edu/Portals/68/Documents/stratperspective/china/Chin....

[10] “Iran’s President Calls for Stronger Ties with China,” Xinhua, February 16, 2015, http://news.xinhuanet.com/english/china/2015-02/16/c_134000664.htm.

[11] Shannon Tiezzi, “China Wants More Military Co-op with Iran (Sorry, US and Pakistan),” The Diplomat, October 24, 2014, http://thediplomat.com/2014/10/china-wants-more-military-co-op-with-iran....

[12] Jeffrey S. Payne, “Eurasia: The Hype of Continentalism,” The Diplomat, February 3, 2015, http://thediplomat.com/2015/02/eurasia-the-hype-of-continentalism/.

[13] “Can Iran Be Stopped?” The Economist, June 20, 2013, http://www.economist.com/news/leaders/21579835-west-should-intervene-syr....

[14] “China, Russia Issue Joint Statement on Syria Crisis,” Xinhua, September 26, 2013, http://news.xinhuanet.com/english/china/2013-09/26/c_132752238.htm.