In August, China and Iran signed a trade, politics, culture, and security deal that would see China invest $16 billion annually in Iran over the next 25 years. The agreement is a gamechanger for Iran, as the country has been struggling to stay afloat amid multiple rounds of sanctions and the spread of the unprecedented COVID-19 pandemic. The deal will also enable Iran to expand its economic prowess and continue funding its proxies and allies. However, in a time where Arab nations are uniting with Israel to foster peace, this newfound partnership with China will undermine these efforts and hinder regional security and stability.
As per the deal, which is formally known as the Iran-China 25-Year Cooperation Program, China will invest in Iran’s telecommunications, gas, oil, petrochemicals, harbors, railroads, and banking sectors. In return, Iran will sell its oil to China at a discounted rate of $10.95 per barrel and cover the associated transportation costs. The deal is unusual because Iran is typically highly defensive when it comes to protecting its national sovereignty. However, given that the country’s economic hardships continue to grow, a long-term deal can help alleviate such a situation.
In addition, Iran has been struggling to acquire the financial support to expand its oil and gas infrastructure and its principal business sectors. The deal with China is structured to directly address these issues and allow Iran to finalize the production of its industrial shipping centers, which will subsequently enable the nation to infiltrate the critical shipping passages that lie in the Strait of Hormuz.
From China’s perspective, the deal creates an opportunity to expand its geopolitical influence in the region, challenge U.S. interests, and encourage Iran to adopt a “Look-East” policy without undermining its existing partners. China has also been working to diversify its energy sources as the country currently relies on Saudi Arabia, an important ally of the United States, for a large portion of its crude oil supply. Chinese imports from Saudi Arabia hit a new record of 2.16 million barrels per day in May, and this dependency on the kingdom, and other U.S. allies in the Gulf for oil supplies, threatens China’s overall energy security. The recent deal with Iran is the biggest deal between China and any Belt and Road Initiative (BRI) country, and given that it centers significantly on oil, the agreement would alleviate China’s concerns related to energy suppliers.
The implications of this new partnership for the United States and its allies have been widely discussed. However, less attention has been paid to what the consequences of this deal will be for the Middle East. Over the past several months, Middle East nations have been working to foster peace and security in the region by normalizing relations with Israel, a longstanding foe of many Arab countries. The deal with China, however, threatens these efforts as it empowers Iran to continue its illicit activities that encourage tensions in the region. For example, this new influx of funding, specifically to Iran’s oil sectors, is likely to encourage greater and continued aggression from the nation in the Strait of Hormuz, something that was out of reach for the country while being struck down by sanctions. 20% of the global oil supply flows through the Strait, and it is considered a critical and strategic international trade route. Over the past several years, Iran has been accused of harassing and hijacking other nations’ ships, sparking significant tension between countries who rely on the Strait.
In addition, experts have expressed concerns that Iran will take advantage of China’s economic support to continue funding and expanding its proxies, which include Hezbollah, Hamas, and the Houthis in Yemen. These terror organizations are embroiled in ongoing regional conflicts and tensions, and increased funding from Iran could embolden them and encourage greater violence.
Further, geopolitical analysts have outlined that China’s growing influence in the region could also play a destabilizing role, as the nation is known for engaging in extractive and exploitative partnerships that prioritize the country’s profits and goals over the wellbeing of its partner nations. Given that one of the primary purposes of China’s Belt and Road Initiative is to undercut U.S. influence around the world, the formalization of this partnership with Iran, as well as the establishment of other partnerships with Middle Eastern nations, could also make the Middle East a focal point in which U.S.-China tensions can play out in going forward.
The Middle East is a region that has been riddled with instability and geopolitical tensions for decades. While Iran’s newfound partnership with China provides the cash-strapped country with a critical economic lifeline, it will likely also empower the nation to fund and engage in behaviors that are contradictory to ongoing peace and conflict resolution efforts. This partnership poses a severe threat to ongoing normalization efforts and could significantly destabilize the region further.
