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The Diplomat author Mercy Kuo regularly engages subject-matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into U.S. Asia policy. This conversation with Dr. Gedaliah Afterman, head of the Asia Policy Program at the Abba Eban Institute for International Diplomacy at the Interdisciplinary Center Herzliya in Israel, is the 270th in “The Trans-Pacific View Insight Series.”
How has the China-Iran 25-year agreement strategically changed bilateral relations?
The agreement has been described both as a new China-Iran strategic alliance and as an empty gesture. The truth probably lies somewhere in the middle. The signed agreement has not been made public to date, but a draft circulated by Tehran in 2020 allows some insight into its content. The current agreement, first discussed in 2016, appears to be a long-term roadmap rather than a groundbreaking strategic alliance. It maps out potential areas of cooperation, including the energy, banking, infrastructure, and industrial sectors. It also mentions cooperation on intelligence, counterterrorism, and Chinese investment in several Iranian ports. But which elements of the agreement will materialize, and to what degree, remains to be seen – these decisions are generally in Beijing’s hands.
Finally, concerns over potential military cooperation between Iran and China seem at this point to be overstated. China has a considerable economic interest in strengthening its relations with Saudi Arabia and other Gulf states and therefore is unlikely to become a major arms supplier to Iran.
Analyze the symbolism and substance of the bilateral agreement.
China’s interest in Iran has traditionally been based on its need to secure its energy supply. Iran holds a key position in China’s Belt and Road Initiative (BRI), and the trade relationship has diversified in recent years. Iran has become a growing market for Chinese goods, and China is involved in Iranian infrastructure projects.
Beijing also views its relations with Iran through the prism of China-U.S. relations, using them as a strategic foothold within a U.S.-dominated region and as leverage over Washington. But ultimately, one must remember that Iran needs China much more than the latter needs Iran.
These aspects are reflected in the context of the agreement. The precursor to the current agreement, the Comprehensive Strategic Partnership (CSP), which was signed in 2016, includes a goal of reaching $600 billion worth of bilateral trade within a decade. However, Sino-Iranian trade has been in steady decline in recent years. It currently stands at $20 billion annually, a substantial fall from $52 billion in 2014 – partially, but not only, due to U.S. sanctions.
While the latest agreement holds currently mostly political and symbolic importance for both Beijing and Tehran, it still, particularly for China, offers an important “insurance policy” if tensions with the U.S. lead to blocking of oil trade with Saudi Arabia and the Gulf.
Explain how this agreement serves China’s long-term ambitions in the Middle East.
China has traditionally viewed the Middle East as part of the U.S. sphere of influence, but Beijing’s engagement with the region in the last decade is slowly challenging this paradigm. Beijing does not appear to seek to replace U.S. military power, at least for now. Instead, it has focused on establishing close ties with traditional U.S allies via investment and economic cooperation and has positioned itself as a viable alternative, especially in the longer term.
In fact, before signing the agreement with Iran, China had already signed similar agreements with neighboring Saudi Arabia and the UAE. In 2019, China imported 17 percent of its oil from Saudi Arabia, around 10 percent from Iraq, and only approximately 3 percent from Iran (down from a high of 14 percent in 2012). This development reflects the fact that China’s reliance on Iran as an energy supplier has declined considerably.
In line with China’s regional balancing act, the agreement is meant to reassure Iran without alarming China’s partners in the Gulf and Israel. Indeed, Gulf states tend to view it as part of the superpower dynamic vis-à-vis the U.S., arguing that China is unlikely to risk its strategic relationships in the region for Iran’s sake.
What is the impact of this agreement on Israel?
There has been criticism in some Israeli circles of what is perceived as China aiding Iran in evading U.S. sanctions. However, the impact of the agreement on Israel, to date, has been minimal.
It has served as a timely reminder for Israeli policymakers that China is developing a growing interest in the Middle East and that the region will likely become a more active arena for superpower competition. Israel and its Gulf partners may be spurred to engage Beijing more deeply, both bilaterally and as a group. One such idea could be the promotion of a regional free trade agreement with China.
While Israel finds itself increasingly “stuck in the middle” between the competing superpowers, with U.S. pressure to reduce its engagement with China likely to continue under President Biden – and despite the recent agreement – Sino-Israeli relations remain intact, with both countries set to sign a free trade agreement this year.
How is China using this agreement as leverage vis-à-vis U.S. leadership in the Middle East and Washington’s attempts to re-engage Tehran on the Joint Comprehensive Plan of Action (JCPOA)?
The agreement is a clear message from Beijing to Washington. Together with its increased oil purchases from Iran in the months following the election of President Biden, the agreement is meant to signal that China can still create difficulties for the United States in the Middle East in response to U.S. pressures in other regions.
While the agreement aims to help Iran end its isolation and improve its current position in renegotiating the JCPOA, China intends not to prevent the JCPOA’s revival. Indeed, since the China-Iran agreement depends on a renewed P5+1 agreement and the lifting of sanctions to materialize, China has a strong interest in reviving the JCPOA. Furthermore, Beijing views a return to the negotiation table as important to promoting its global and regional interests. Therefore, under the right circumstances, China could utilize its agreement with Iran to incentivize Tehran to return to the negotiating table.
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