What China and Iran's 25-year agreement means for South Asia
What China and Iran's 25-year agreement means for South Asia
WRITTEN BY TRIDIVESH SINGH MAINI
21 July 2020
China and Iran are approaching the final stages of negotiating a comprehensive 25 year economic and strategic partnership, according to recent reports. Iran’s Foreign Minister, Mohammad Javad Zarif told the Iranian Parliament, on 5 July, that the agreement between both countries is being negotiated with ‘courage and conviction’.
Negotiations between both countries have been ongoing for some time. During Mohammad Javad Zarif’s visit to China in August 2019, key provisions of the historic agreement were worked out, and before that during Chinese President Xi Jinping's visit to Iran in January 2016, both sides announced their intention to strengthen bilateral relations with the signing of a precursor document. During Xi's visit, Iran and China announced plans to substantially boost bilateral trade by $600 billion over the next 10 years.
Key provisions of the 25-year deal
Iran’s economy has in recent months been struck by the twin blows of the Trump Administration's sanctions and the COVID-19 pandemic. Under the provisions of the deal, however, Tehran could get some respite once enacted. According to sources, China has made a commitment of $280 billion in capital investments towards developing Iran’s oil, gas and petrochemicals industries. A further $120 billion of investment has been allocated for upgrading Iran’s transport and manufacturing infrastructure.
Important transport projects which will fall under the auspices of the deal include a 2,300-kilometre road, which will connect Tehran with Urumqi in China's Xinjiang province. The aim of which will be to link up with the Urumqi-Gwadar highway, itself an important component of the China Pakistan Economic Corridor (CPEC). Beijing’s ultimate ambition is to connect this transport network with Central Asia, Turkey, and eventually extend it to continental Europe. China has also announced its ambitions to invest in strategically important rail projects, which are economically important for Iran and fit in with China’s broader connectivity objectives.
The most important part of the 25-year deal is that it allows China access to key port facilities, including Jask, located outside of the Strait of Hormuz and near the entrance of the Persian Gulf. The access to Iranian ports would provide China with a strategic network close to waters through which the world's crucial oil supplies transit.
Chinese business
What is significant about this agreement, even more than the magnitude of the investment promised, is the access Chinese businesses will have to Iranian markets. Under its terms, Chinese corporations will be given priority in bids for important oil, gas, and petrochemical contracts in Iran.
It’s not just in the economic sphere where Sino-Iranian cooperation is increasing, but in the security sphere also. Recent reports suggest that the agreement would allow as many as 5,000 Chinese troops to be stationed in Iran to protect key Chinese business interests. The proposals, endorsed by Iran’s Revolutionary Guard Corps (IRGC), calls for the wider strengthening of air and naval cooperation between Iran, China, and Russia. All three states conducted large maritime drills in the Persian Gulf in December 2019.
Mounting criticism
The agreement has faced strong criticism from various quarters within Iran due to its lack of transparency and because of the increased levels of dependence Iran would have towards China. In his 5 July statement, Mohammad Javad Zarif received heckles from Iranian lawmakers. Sceptics of the agreement include high-level politicians within the Islamic government who argue that signing the agreement would make Iran an appendage of Beijing. Former Iranian President, Mahmoud Ahmadinejad, commenting on the deal said:
“Any such accord that counters the people’s will and national interests lacks validity and will not be recognised by the Iranian nation.”
Several analysts, however, believe that Iran was left with no option but to turn towards China after Trump's increasingly aggressive stance towards Tehran since entering office.
Trump who withdrew the US from the P5+1 nuclear agreement in 2018, imposed stringent sanctions on Iran, even as the country suffered thousands of deaths from the COVID-19 pandemic. Several US politicians and allies had urged Trump to remove sanctions on humanitarian grounds but to no avail. US allies like the UK, France, and Germany have aided Iran amid COVID-19, through the Special Purpose Vehicle (SPV), INSTEX. Japan too has been in touch with Iran and provided medical assistance including the drug Avigan.
Implications of the China-Iran agreement for South Asia
This agreement will have two important implications in the context of South Asia. First, the emergence of a strong China-Pakistan-Iran trilateral. In the past year, ties between Tehran and Islamabad have warmed after India stopped purchasing oil from Iran in May 2019. Iran was the third-largest supplier of oil to India, but the US removed the waiver which it had provided India and other countries to purchase Iranian oil.
Iran has sought to improve economic ties with Pakistan and even urged Pakistan to participate in the Chabahar Project. India had taken over operations of phase 1 of the project which has been touted as India’s answer to the Gwadar port and an important component of CPEC. Even on strategic issues, there has been increasing convergence between Iran and Pakistan with Tehran highly critical of India's decision to revoke Article 370 in Kashmir. Interestingly, Iran had also suggested that Chabahar-Gwadar Project be connected in 2019.
According to analysts, New Delhi has reasons to be concerned not just about China’s access to Jask, but with the serious possibility of Iran handing over the Chabahar Project to China. Iran for its part has denied such an outcome will occur. The Iranian government has decided to proceed with the construction of the rail line connecting Chabahar-Zahedan along the border with Afghanistan. This was an important project in the context of India’s vision for trilateral regional connectivity between India-Afghanistan and Iran as an agreement was signed in 2016, during PM Modi’s Iran visit. The project was to be carried out by Indian Railways Construction Ltd (IRCON) and the Iranian Railways.
This could be important since Chabahar has strategic importance for India and was an important component of the vision for India-Afghanistan-Iran trilateral connectivity. Realising the importance of the project, the US had provided an exemption from sanctions. In December 2019, both New Delhi and Tehran had sought to expedite the Chabahar Project, but given the slow progress and souring ties, Iran had begun to look at the possibility of China taking over.
Both the economic and strategic components of this agreement will also enable China to increase its strategic and economic leverage with Afghanistan. First, China has been trying to get Afghanistan onboard the CPEC project, Second, in the strategic and security context, Beijing will seek to fill the vacuum and has already been seeking to build close ties with the Afghanistan government and Taliban and has also sought to reduce tensions between Islamabad and Kabul.
In conclusion
The agreement will alter the geopolitical dynamics both at a global level between the great powers and in the context of South Asia more locally. New Delhi’s strategic relationship with Washington has strengthened, even more so after Chinese incursions into Ladakh and the violent clashes between the PLA and Indian Army, yet it should also keep a close watch on Iran and not lose the Chabahar Project to China. This will impact India’s connectivity but also its strategic interests in Afghanistan. China on the other hand would have gone one step further in achieving its economic and connectivity objectives, while also enhancing its strategic clout in South Asia.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biography
Tridivesh Singh Maini is a New Delhi-based policy analyst associated with Jindal School of International Affairs, Sonipat. His areas of interest include the India-China-Pakistan triangle, Belt and Road Initiative (BRI), the role of India’s state governments in foreign policy (especially the economic dimension), and federalism in India. He was a South Asian Voices Visiting Fellow at the Stimson Centre, Washington DC and a Public Policy Scholar with The Hindu Centre for Politics and Public Policy, Chennai. He can he reached by email. Image credit: Wikipedia Commons.