Home > News > China and Iran announced a new economic and security partnership. That’s not as alarming as it sounds.
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China and Iran announced a new economic and security partnership. That’s not as alarming as it sounds.

China has similar deals with a number of Middle Eastern countries

- March 31, 2021

On Saturday, Chinese Foreign Minister Wang Yi was in Tehran to sign a 25-year partnership deal between China and Iran. The deal, according to a leaked draft, outlines plans for economic, political and security cooperation between the two countries, which are celebrating 50 years of diplomatic ties.

Our research provides some important context to this announcement. Since news of the agreement surfaced in 2016, the prospect of a closer alliance between two U.S. rivals has inspired alarm in the United States. In March, President Biden told a reporter he had been “concerned for over a year” about the partnership.

But media reports tend to exaggerate the nature of the deal — and there are several misconceptions here. For China, “Comprehensive Strategic Partnerships,” or CSPs, are a standard foreign policy tool. By signing road maps for economic and security cooperation with countries across the Middle East, it is seeking to ensure that it does not stoke regional rivalries. China has similar cooperation deals in place with Iraq (signed in 2015), Saudi Arabia (signed in 2016) and the United Arab Emirates (signed in 2018).

Far from signaling a uniquely deep or ambitious alliance between China and Iran, the newly signed CSP reflects Iran’s long-frustrated efforts to get China to provide the same level of economic and security cooperation it offers other countries in the Middle East. In a study we conducted last year of China’s relations with Iran and five other Middle Eastern countries, we found that Iran lags behind its neighbors with regard to both the extent of Chinese economic commitments and the level of bilateral security cooperation. Rather than elevating the China-Iran relationship to new heights, the belated signing of this CSP is probably a clear signal that Iran wants to catch up to its neighbors.

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It’s not a “$400 billion deal”

A New York Times headline declared the new deal would amount to $400 billion over the next 25 years — which means China would need to invest $16 billion on an annual basis. That’s an astronomical sum when considering that total foreign direct investment in Saudi Arabia, the world’s largest oil producer and a country unencumbered by U.S. sanctions, has averaged just $5.1 billion over the past five years.

If the target sounds unrealistic, it’s because it is not real. The $400 billion figure was first cited in 2019 in a poorly sourced article. The fact sheet on the deal published this week by Iran’s Foreign Affairs Ministry shows that the deal is a road map with no specific financial targets. Likewise, Chinese officials have emphasized that there are no set contracts or goals in this framework.

China-Iran trade and investment have struggled

Even with the launch of the Belt and Road Initiative in 2013, China’s ambitious plan to connect Eurasia through infrastructure investment, Iran was under the strictest sanctions ever levied by the United States. Trade between China and Iran did grow despite the sanctions, but this growth was mostly a reflection of China’s emergence as a major global supplier of industrial goods in the same period. Meanwhile, planned investments in energy and transport infrastructure hit a wall as sanctions risks proved too great for China’s major contractors.

Conditions for bilateral trade and investment improved in January 2016 when the implementation of the Iran nuclear deal lifted international sanctions. That same month, Chinese President Xi Jinping traveled to Tehran and committed to the new CSP. But President Donald Trump’s withdrawal from the Iran nuclear deal and the reimposition of U.S. secondary sanctions complicated China-Iran plans. China-Iran trade has languished since.

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Will China get a security dividend?

U.S.-Iran tensions have done more than complicate China-Iran trade. Around 3 million barrels per day of crude oil pass through the Strait of Hormuz en route to China, making it the largest oil customer in this trade route. The prospect of a regional conflict halting the route has spurred Beijing to get more involved in Middle East security, even though it remains hesitant to become entangled in the region’s complex politics.

China has conducted two multilateral naval drills with Iran and Russia under the pretexts of anti-piracy and counterterrorism. China has used its CSP deals to structure security cooperation with countries across the region, including those that count themselves as Iran’s rivals — and partners of the United States. A naval exercise with Iran is usually accompanied by a Chinese drill with the Saudi royal navy within the same few weeks, for instance.

While the newly signed CSP with Iran does portend increased security cooperation, China has in no way promised a steadfast military alliance. Such an agreement would undermine the benefits China draws from the established U.S. security architecture in the region — a set of security partnerships and bases established in the 20th century to protect oil imports from Middle East suppliers.

There also appears to be no incoming flurry of Chinese arms sales to Iran, even with the end of the United Nations arms embargo last fall. China’s nascent Middle East arms trade is directed toward Iran’s neighbors. Beijing’s motive in this market is profit, and cash-strapped Iran is not a lucrative customer. China and Iran are also mismatched in capabilities. Iran seeks air defense weaponry, and China’s main sales in the region are tanks. China struggles to manufacture jet engines, and its new drones have crashed in the field.

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China’s support for the Iran deal will continue

Will the CSP compete with, or complement, U.S. interests? It’s important to remember that China, as a permanent U.N. Security Council member, is a signatory to the Iran nuclear deal. And China stands to benefit economically as well from the resumption of this nuclear control measure and from greater regional stability. After all, removing international sanctions would help Chinese trade and investment in Iran.

In this light, a CSP with China isn’t likely to embolden Iran’s moves away from the nuclear deal. Iranian Foreign Minister Javad Zarif heralded his counterpart as a “friend for difficult times,” but China and Iran both know that their interests are better served by a U.S. return to the Iran nuclear deal.

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Lucille Greer is a Schwarzman Fellow at the Wilson Center’s Kissinger Institute on China and the United States.

Esfandyar Batmanghelidj is CEO of the Bourse & Bazaar Foundation, a think tank focused on issues of economic diplomacy in the Middle East and Central Asia, particularly Iran. He is also a Visiting Fellow at the European Council on Foreign Relations.